April 30, 2014

A political fight in Chicago could determine the future of pensions and public services.

There's a battle royale raging in Chicago. It pits hedge funds, the Chicago financial exchanges, real estate interests and Mayor Rahm Emanuel on the one side, against public employee unions and community groups on the other.

At issue is whether public employee pension benefits should be slashed. Mayor Emanuel claims that, "If we make no reforms at all across our pension funds, we would have to raise City property taxes by 150%.... Businesses and families would flee, not just from our city but from our state." By 2017, he claims the city will have to pay $2.4 billion a year into the pension fund.

The public employee unions and community activists contend that city's fiscal problems could be solved easily through a small sales tax on financial trades on the Chicago Mercantile Exchange and the Chicago Board Options Exchange.

The outcome may determine the health and well-being of pension funds as well as public services all across the country.

Wall Street buys a Mayor?

When Rahm Emanuel worked as a presidential assistant in the Clinton administration, he earned $118,000 a year. After he left his White House job in 1998, he got a raise, making over $18 millionin the next two and a half years working for the "boutique" investment banking firm of Wasserstein Perella. Emanuel had no previous banking experience.

Ken Griffin, the CEO of the Chicago-based Citadel hedge fund and "his wife Anne Dias Griffin, donated more than $200,000 to Mayor Emanuel’s campaign for Mayor in 2011," report David Sirota and Ben Joravsky in Pandodaily. "Griffin describes the mayor as his 'good friend'. Other Citadel employees have donated about $178,000 to Emanuel’s campaign."

The 45-year-old Griffin's income for 2013 was $900 million (or about $492,632 an hour).

Apparently a good deal of his income comes from high-frequency trading (see my summary) that runs through the two Chicago financial exchanges. "His Citadel LLC returned more than 300 percent in a fund started as a high-frequency strategy," according to Bloomberg News.

Griffin, alone, could fund all of Chicago's pension liabilities for the current year (estimated at $692 million) and still have $208 million left to scrap by on. Yet Griffin is terribly worried that the mayor is being too soft on retirees. He "castigated Chicago and Illinois politicians for not making 'tough choices,' blaming Democrats who control city, county and state government for not fixing pension, education and crime problems," reports Crain's.

Mayor's Payback?

"On March 5," report Sirota and Joravsky, "Chicago’s city council overwhelmingly voted to approve Mayor Rahm Emanuel’s proposal to divert $55 million of taxpayer resources into a new privately run hotel in the city’s south loop." The Marriot was selected to run "one of America’s largest hotels next to America’s largest convention center—and doing so with massive taxpayer subsidies, but without having to pay to construct the hotel and without having to pay property taxes."

As luck would have it, Griffin is likely to make a great deal of money on this deal: "In the months before the development deal was announced, Griffin’s hedge fund was buying up large blocs of Marriott stock." What a coincidence!

Why Does a Millionaire Mayor and a Billionaire Hedge Fund CEO Team Up to Attack Public Pensions?

Because that's where the money is, and lots of it. Mayors and governors want to reduce pension fund contributions so that they can continue to lavish tax breaks and subsidies on their corporate patrons and still balance their budgets. In Chicago, the yearly cost of those corporate tax subsidies is already higher than the yearly costs of Chicago's pension fund outlays, according to an analysis by Goods Jobs First.

The Wall Street-trained treasurer of Rhode Island, Gina Raimondo, rammed through severe cuts to public pension funds, while her hedge fund allies lined up at the trough. As Matt Taibbi reports, Rhode Island's "strategy for saving money involved handing more than $1 billion—14 percent of the state fund—to hedge funds, including a trio of well-known New York-based funds: Dan Loeb's Third Point Capital was given $66 million, Ken Garschina's Mason Capital got $64 million and $70 million went to Paul Singer's Elliott Management."

The amazing irony is there would be no talk of a pension "crisis" at all were it not for the fact that Wall Street crashed the economy. The hedge funds that covet pension fund reform and pension fund contracts were full partners in the reckless gambling spree that took down the economy and destroyed 8 million jobs in a matter of months. As economist Dean Baker shows the pension shortfall is primarily the result of the 2007-'08 crash in the financial markets. "If pension funds had earned returns just equal to the interest rate on 30-year Treasury bonds in the three years since 2007, their assets would be more than $850 billion greater than they are today."

The lesson learned should be this: If you use hedge funds to run your pension funds, you'll get fleeced come the next crisis.

Why Are the Financialists Getting Away With It?

Rahm Emanuel, Chris Christie and hundreds of other politicians are able to attack public pension funds with impunity because defined benefit pensions in the private sector are an endangered species. One demagogic question is all they need to ask and they ask it again and again:

"Why should you pay taxes for public employee benefits that you don't have?"

Such an attack only works because Wall Street already has systematically destroyed private sector defined benefit pension funds—which are funds that provide retirees with a set payment for life (and sometimes beyond for spouses). Employers can reduce their costs by switching from defined benefit pensions to defined contribution 401ks. Better yet they might be able to eliminate the employer contributions altogether. Employees usually benefit more from defined benefit pensions and are very reluctant to see them altered. (For more about defined pension funds see here.)

As the chart below demonstrates less than 15 percent of private sector employees now have defined benefit pension programs, down from nearly 40% in 1979. Meanwhile, 401ks have grown from 16% to over 42%. This didn't happen by accident.

Wall Street Strip-Mines Private Pension Funds

Defined pension funds are disappearing for two overlapping reasons. The first is that unions, the main driver of defined-benefit pensions, are in decline. Today, union's represent less than 7 percent of the private sector workforce, down from 35% in 1955. But that's only part of the story.

The most crucial cause is the deregulation of the financial sector which started in the late 1970s. Once freed from their New Deal shackles, corporate raiders (now called private equity firms, hedge funds and investment firms) strip-mined thousands of corporations using borrowed money. Those debts were (and still are) placed on the books of the target company and its cash flow is used to pay the interest on the debts as well as pay huge sums to the raiders, their investment advisors, their bankers, and the compliant top managers of the target company.

How does the target firm pay for all these new costs? The raiders, of course, claim that through their own entrepreneurial genius, they "unlock" hidden value. In reality, they milk the company in every way imaginable. They sell off product lines, shut down facilities, move work off-shore, slash R&D, and raid the pension fund, claiming it was "overfunded." Often the target company also tries to discontinue the pensions entirely or shift to 401ks forcing the employees to kick in most of the money. Many corporations become so loaded up with debt that they go into bankruptcy, through which they can further whittle away employee benefits and reduce or discontinue pensions.

As the financial strip-mining proceeds through thousands upon thousands of corporations, the average worker loses his or her benefits, and the financial strip-miners become filthy rich. As the chart below shows, in 1970 the top 100 CEO earned $45 for each $1 earned by the average worker. By 2006, the ratio jumped to 1,723 to one.

A Tax on Financial Strip Mining?

The financial transaction tax (sometimes called a financial speculation tax or Robin Hood Tax) is designed to retrieve some of the money that is being siphoned away from our wages, benefits and tax dollars. Because the super-rich, their hedge funds and their corporations have a myriad of ways to avoid income taxes, especially by shifting money offshore, the financial transaction tax hits them where they live—buying and selling financial assets on the markets, especially on the Chicago exchanges where derivatives and futures contracts are sold.

It is estimated that a minuscule tax ($1 dollar on both the buyer and on the seller of future contracts, and $2 on derivatives contracts) would generate $12 billion a year for Illinois. That would be $9.6 billion more than $2.4 billion pension shortfall Mayor Emanuel claims Chicago will face in 2017. That still leaves more than enough money to dramatically improve education and even make higher education tuition free in Illinois (thereby cutting into Wall Street's predatory student loan business).

While such a tax could easily fulfill the promises made to public employees, it might also be prudent and just to use some of the financial tax to create a statewide defined benefit pension fund for private sector as well as public employees. That should put an end to the divide-and-conquer tactics opportunistic politicians and their hedge fund cronies use to enrich themselves and their political ambitions.

Can the financial transaction tax become reality?

Let's take heart from what Rahm Emanuel infamously said when serving as President Obama's chief of staff at the height of the financial crisis:

"You never let a serious crisis go to waste. And what I mean by that it's an opportunity to do things you think you could not do before."

April 29, 2014

What’s difficult to comprehend is that earth's warming due to anthropogenic climate change is happening at an unprecedented rate of anywhere from 1 to 4 degrees C per 100 years. This is Ten Times faster than the Paleocene-Eocene Thermal Maximum (PETM) warming rate of 0.025 degrees C per 100 years – a global warm-up that took place 56 million years ago. Scientists estimate that over a very long period 2 billion tons/year of CO2 rising to 5 billion tons/year were gradually injected into the atmosphere. This compares to 34 billion tons of CO2 going into the atmosphere in 2012 alone! (see: http://www.wunderground.com/climate/PETM.asp).

The PETM event was triggered by volcano activity, permafrost melting, methane hydrate melting, fires. As the ocean surface warmed, currents drove the warm water to the ocean seabed, where it melted the frozen methane hydrates thereby releasing methane gas (or CH4 converted to CO2 in deep waters) into the atmosphere. This intensified global warming with temperatures that rose 5-9 degrees C and up to 23 degrees C in the high Arctic latitudes. The PETM warmth lasted 200,000 years before the extra CO2 was removed from the atmosphere. Massive ocean acidification occurred as the ocean took up the excess carbon. While the climate effect of PTEM was quite severe, the earth’s ecosystem could adapt because the warming-up period lasted hundreds of years due to the very slow release of greenhouse gases. It’s not surprising scientists are warning that the PETM rate of earth warming pales into insignificance compared to that of the past 50 years. It’s going so fast the ecosystems may not be able to keep up this time.

For 650,000 years prior to and including the pre-industrial era, CO2 concentrations did not exceed 300ppm, stabilizing at 280ppm in the pre-industrial period. Since 1850, the speed and scale of today’s CO2 (400ppm concentration and rising) has been extraordinary – an increase of 120ppm over the past 160 years with 75% of that increase taking place the last 50 years! Such a rate of increase over such a short period would have taken hundreds if not thousands of years in prior interglacials, allowing more time for ecological and human species to adapt. Similarly, for 650,000 years prior to and including the pre-industrial era, CH4 concentrations never exceeded 780ppb, but since 1850 have soared to more than 1,800ppb. Clearly, the CO2 and CH4 accelerations – especially since 1960 – are far above the range of natural variability over the past 650,000 years. There is a massive mismatch between what we are doing to the atmosphere and what nature can sustain.

The current rate of increase of CO2 levels has no known precedent. Although oceans do not respond immediately to CO2 buildup, the rapidity of release of GHGs means the resulting acidification of the top vulnerable few hundred meters of the ocean can occur rather quickly. When CO2 increases rapidly, the acidification and positive feedback effects are intensified particularly in shallow waters because of inadequate mixing and buffering of surface layers by deep ocean sinks. If we continue as we are with the insanely high CO2 emissions in the 34 billion tons a year range, scientists say the ocean’s pH will eventually drop to a level where a mix of other chemical-ecological changes will occur like anoxia – an absence of oxygen – disappearance of plankton, widespread bleaching of coral species etc. This portends a potential catastrophic ecological effect.

An ecological threat is also arising relating to the Siberian Ice Complex, or Arctic Shelf methane emissions. The emissions taking place there now are dangerous because of the shallow water depths. In deep waters, methane hydrates oxidize to CO2 before reaching the surface. But in the Siberian region the methane gas is released right into the air. Complicating matters further, current models do not include the effects of methane released from melting permafrost or the ocean sea floor. Almost a quarter of the northern hemisphere is covered in permafrost (compared to 90% in the Antarctica region) which contains huge quantities of centuries-old organic material that in turn, upon decomposition, contains 1.4 to 1.7 trillion tons of carbon – nearly Twice the amount of carbon now in the atmosphere.

But scientists do not know for certain how much carbon could be released as methane and how much as carbon dioxide when the Arctic permafrost thaws. Nor is it known when the greenhouses gases will be released. We do know that wetlands, swamps, ponds, and lakes in the Arctic tundra are the main areas where methane is produced (excluding methane leaks from current feverish “fracking” for limited shale gas). In brief, scientists do know that past mass extinction cooling or warming holocausts corresponded to periods of significant changes in atmospheric CO2 equivalent including CH4 (Mass extinctions and ocean acidification: biological constraints and geological dilemmas by J.E.N. Veron, May 2008).

All this and more means that the most extreme earth warming scenarios the IPCC and other scientific academies have brought forward may not be extreme enough!

More and more people are calling for a "ban on banking," but that's not as crazy as it sounds.

Under a new regime, there would still be entities called "banks." But they'd have a radically scaled back function. They would primarily serve as places that process payments and hold deposits, but they would be stripped of their most pivotal function, which is creating money.

This is a point that's presumably missed by most of the population. You look at money and you think it's something created by the government or the Fed. In fact, money is for the most part created by private banks.

It explains how, contrary to what people might think, a bank doesn't make loans, by taking the deposits of a client and then lending those deposits out. Instead, the bank creates money out of thin air. If you want to get a mortgage for a house, and the bank deems you to be credit-worthy, it puts the amount of money you need into an account. That money in your account becomes a liability for the bank. And the mortgage it now owns is an asset of the bank.

These two images from the Bank of England report spell out nicely how it works.

The first shows how money is created from a bank's perspective.

Bank of England

Prior to your taking out the loan, the bank has a certain amount of reserves, and a small amount of currency as assets, and its liabilities are its customer deposits.

After you take out your own, the bank doesn't dip into its assets to give you money. Instead it creates a brand new asset (the loan it gives you) and a new liability, the brand new money you have as a deposit, which the bank just gave you.

Your assets consist of some deposits and currency prior to the loan. Then after the loan, you have way more deposits than you had more (remember, when you get a loan, it's not like the bank sends you out with a basket of cash. When you get a loan you have more money in your bank account than you had before). That loan is also a liability, since you have to pay it back.

This might seem basic, except this is where money is created these days, not from some other outside force.

Along with their paper, the Bank of England made a nice video explaining money creation. It's worth a quick viewing.

California juries are not bashful – they have been known to render massive punitive damages awards that dwarf the award of compensatory (actual) damages.For example, in one securities fraud case jurors awarded $5.7 million in compensatory damages and $165 million in punitive damages. . . . And in a tobacco case with $5.5 million in compensatory damages, the jury awarded $3 billion in punitive damages . . . .

The question, then, is how to get Wall Street banks before a California jury. How about charging them with common law fraud and breach of contract? That’s what the FDIC just did in its massive 24-count civil suit for damages for LIBOR manipulation, filed in March 2014 against sixteen of the world’s largest banks, including the three largest US banks – JP Morgan Chase, Bank of America and Citigroup.

LIBOR (the London Interbank Offering Rate) is the benchmark rate at which banks themselves can borrow. It is a crucial rate involved in over $400 trillion in derivatives called interest-rate swaps, and it is set by the sixteen private megabanks behind closed doors.

The biggest victims of interest-rate swaps have been local governments, universities, pension funds, and other public entities. The banks have made renegotiating these deals prohibitively expensive, and renegotiation itself is an inadequate remedy. It is the equivalent of the grocer giving you an extra potato when you catch him cheating on the scales. A legal action for fraud is a more fitting and effective remedy. Fraud is grounds both for rescission (calling off the deal) as well as restitution (damages), and in appropriate cases punitive damages.

Trapped in a Fraud

Nationally, municipalities and other large non-profits are thought to have as much as $300 billion in outstanding swap contracts based on LIBOR, deals in which they are trapped due to prohibitive termination fees. According to a 2010 report by the SEIU (Service Employees International Union):

The overall effect is staggering. Banks are estimated to have collected as much as $28 billion in termination fees alone from state and local governments over the past two years. This does not even begin to account for the outsized net payments that state and local governments are now making to the banks. . . .

While the press have reported numerous stories of cities like Detroit, caught with high termination payments, the reality is there are hundreds (maybe even thousands) more cities, counties, utility districts, school districts and state governments with swap agreements [that] are causing cash strapped local and city governments to pay millions of dollars in unneeded fees directly to Wall Street.

All of these entities could have damage claims for fraud, breach of contract and rescission; and that is true whether or not they negotiated directly with one of the LIBOR-rigging banks.

To understand why, it is necessary to understand how swaps work. As explained in my last article here, interest-rate swaps are sold to parties who have taken out loans at variable interest rates, as insurance against rising rates. The most common swap is one where counterparty A (a university, municipal government, etc.) pays a fixed rate to counterparty B (the bank), while receiving from B a floating rate indexed to a reference rate such as LIBOR. If interest rates go up, the municipality gets paid more on the swap contract, offsetting its rising borrowing costs. If interest rates go down, the municipality owes money to the bank on the swap, but that extra charge is offset by the falling interest rate on its variable rate loan. The result is to fix borrowing costs at the lower variable rate.

At least, that is how they are supposed to work. The catch is that the swap is a separate financial agreement – essentially an ongoing bet on interest rates. The borrower owes both the interest onits variable rate loan and what it must pay on its separate swap deal. And the benchmarks for the two rates don’t necessarily track each other. The rate owed on the debt is based on something called the SIFMA municipal bond index. The rate owed by the bank is based on the privately-fixed LIBOR rate.

As noted by Stephen Gandel on CNNMoney, when the rate-setting banks started manipulating LIBOR, the two rates decoupled, sometimes radically. Public entities wound up paying substantially more than the fixed rate they had bargained for – a failure of consideration constituting breach of contract. Breach of contract is grounds for rescission and damages.

Pain and Suffering in California

The SEIU report noted that no one has yet completely categorized all the outstanding swap deals entered into by local and state governments. But in a sampling of swaps within California, involving ten cities and counties (San Francisco, Corcoran, Los Angeles, Menlo Park, Oakland, Oxnard, Pittsburgh, Richmond, Riverside, and Sacramento), one community college district, one utility district, one transportation authority, and the state itself, the collective tab was $365 million in swap payments annually, with total termination fees exceeding $1 billion.

Omitted from the sample was the University of California system, which alone is reported to have lost tens of millions of dollars on interest-rate swaps. According to an article in the Orange County Register on February 24, 2014, the swaps now cost the university system an estimated $6 million a year. University accountants estimate that the 10-campus system will lose as much as $136 million over the next 34 years if it remains locked into the deals, losses that would be reduced only if interest rates started to rise. According to the article:

Already officials have been forced to unwind a contract at UC Davis, requiring the university to pay $9 million in termination fees and other costs to several banks. That sum would have covered the tuition and fees of 682 undergraduates for a year.

The university is facing the losses at a time when it is under tremendous financial stress. Administrators have tripled the cost of tuition and fees in the past 10 years, but still can’t cover escalating expenses. Class sizes have increased. Families have been angered by the rising price of attending the university, which has left students in deeper debt.

Peter Taylor, the university’s Chief Financial Officer, defended the swaps, saying he was confident that interest rates would rise in coming years, reversing what the deals have lost. But for that to be true, rates would have to rise by multiples that would drive interest on the soaring federal debt to prohibitive levels, something the Federal Reserve is not likely to allow.

The Revolving Door

The UC’s dilemma is explored in a report titled “Swapping Our Future: How Students and Taxpayers Are Funding Risky UC Borrowing and Wall Street Profits.” The authors, a group called Public Sociologists of Berkeley, say that two factors were responsible for the precipitous decline in interest rates that drove up UC’s relative borrowing costs. One was the move by the Federal Reserve to push interest rates to record lows in order to stabilize the largest banks. The other was the illegal effort by major banks to manipulate LIBOR, which indexes interest rates on most bonds issued by UC.

Why, asked the authors, has UC’s management not tried to renegotiate the deals? They pointed to the revolving door between management and Wall Street. Unlike in earlier years, current and former business and finance executives now play a prominent role on the UC Board of Regents.

They include Chief Financial Officer Taylor, who walked through the revolving door from Lehman Brothers, where he was a top banker in Lehman’s municipal finance business in 2007. That was when the bank sold the university a swap related to debt at UCLA that has now become the source of its biggest swap losses. The university hired Taylor for his $400,000-a-year position in 2009, and he has continued to sign contracts for swaps on its behalf since.

Several very wealthy, politically powerful men are fixtures on the regent’s investment committee, including Richard C. Blum (Wall Streeter, war contractor, and husband of U.S. Senator Dianne Feinstein), and Paul Wachter (Gov. Arnold Schwarzenegger’s long-time business partner and financial advisor). The probability of conflicts of interest inside this committee—as it moves billions of dollars between public and private companies and investment banks—is enormous.

Blum’s firm Blum Capital is also an adviser to CalPERS, the California Public Employees’ Retirement System, which also got caught in the LIBOR-rigging scandal. “Once again,” said CalPERS Chief Investment Officer Joseph Dear of the LIBOR-rigging, “the financial services industry demonstrated that it cannot be trusted to make decisions in the long-term interests of investors.” If the financial services industry cannot be trusted, it needs to be replaced with something that can be.

Remedies

The Public Sociologists of Berkeley recommend renegotiation of the onerous interest rate swaps, which could save up to $200 million for the UC system; and evaluation of the university’s legal options concerning the manipulation of LIBOR. As demonstrated in the new FDIC suit, those options include not just renegotiating on better terms but rescission and damages for fraud and breach of contract. These are remedies that could be sought by local governments and public entities across the state and the nation.

The larger question is why our state and local governments continue to do business with a corrupt global banking cartel. There is an alternative. They could set up their own publicly-owned banks, on the model of the state-owned Bank of North Dakota. Fraud could be avoided, profits could be recaptured, and interest could become a much-needed source of public revenue. Credit could become a public utility, dispensed as needed to benefit local residents and local economies.

April 25, 2014

Over the past decade, Elizabeth Kolbert has established herself as one of our very best science writers. She has developed a distinctive and eloquent voice of conscience on issues arising from the extraordinary assault on the ecosphere, and those who have enjoyed her previous works like “Field Notes From a Catastrophe” will not be disappointed by her powerful new book, “The Sixth Extinction: An Unnatural History.”

Kolbert, a staff writer at The New Yorker, reports from the front lines of the violent collision between civilization and our planet’s ecosystem: the Andes, the Amazon rain forest, the Great Barrier Reef — and her backyard. In lucid prose, she examines the role of man-made climate change in causing what biologists call the sixth mass extinction — the current spasm of plant and animal loss that threatens to eliminate 20 to 50 percent of all living species on earth within this century.

Extinction is a relatively new idea in the scientific community. Well into the 18th century, people found it impossible to accept the idea that species had once lived on earth but had been subsequently lost. Scientists simply could not envision a planetary force powerful enough to wipe out forms of life that were common in prior ages.

In the same way, and for many of the same reasons, many today find it inconceivable that we could possibly be responsible for destroying the integrity of our planet’s ecology. There are psychological barriers to even imagining that what we love so much could be lost — could be destroyed forever. As a result, many of us refuse to contemplate it. Like an audience entertained by a magician, we allow ourselves to be deceived by those with a stake in persuading us to ignore reality.

For example, we continue to use the world’s atmosphere as an open sewer for the daily dumping of more than 90 million tons of gaseous waste. If trends continue, the global temperature will keep rising, triggering “world-altering events,” Kolbert writes. According to a conservative and unchallenged calculation by the climatologist James Hansen, the man-made pollution already in the atmosphere traps as much extra heat energy every 24 hours as would be released by the explosion of 400,000 Hiroshima-class nuclear bombs. The resulting rapid warming of both the atmosphere and the ocean, which Kolbert notes has absorbed about one-third of the carbon dioxide we have produced, is wreaking havoc on earth’s delicately balanced ecosystems. It threatens both the web of living species with which we share the planet and the future viability of civilization. “By disrupting these systems,” Kolbert writes, “we’re putting our own survival in danger.”

The earth’s water cycle is being dangerously disturbed, as warmer oceans evaporate more water vapor into the air. Warmer air holds more moisture (there has been an astonishing 4 percent increase in global humidity in just the last 30 years) and funnels it toward landmasses, where it is released in much larger downpours, causing larger and more frequent floods and mudslides.

The extra heat is also absorbed in the top layer of the seas, which makes ocean-based storms more destructive. Just before Hurricane Sandy, the area of the Atlantic immediately windward from New York City and New Jersey was up to nine degrees warmer than normal. And just before Typhoon Haiyan hit the Philippines, the area of the Pacific from which it drew its energy was about 5.4 degrees above average.

Our oceans, a crucial food source for billions, have become not only warmer but also more acidic than they have been in millions of years. They struggle to absorb excess heat and carbon pollution — which is why, as Kolbert points out, coral reefs might be the first entire ecosystem to go extinct in the modern era.

The same extra heat pulls moisture from soil in drought-prone regions, causing deeper and longer-lasting droughts. The drying of trees and other vegetation leads also to an increase in the frequency and average size of fires.

Food crops are threatened not only by more pests and the disruption of long-predictable rainy season-dry season patterns, but also by the growing impact of heat stress itself on corn, wheat, rice and other staples.

Earth’s ice-covered regions are melting. The vanishing of the Arctic ice cap is changing the heat absorption at the top of the world, and may be affecting the location of the Northern Hemisphere jet stream and storm tracks and slowing down the movement of storm systems. Meanwhile, the growing loss of ice in Antarctica and Greenland is accelerating sea level rise and threatening low-lying coastal cities and regions.

Viruses, bacteria, disease-carrying species like mosquitoes and ticks, and pest species like bark beetles are now being pushed far beyond their native ranges. Everywhere the intricate interconnections crucial to sustaining life are increasingly being pulled apart.

Photo Credit Christoph Niemann

This is the world we’ve made. And in her timely, meticulously researched and well-written book, Kolbert combines scientific analysis and personal narratives to explain it to us. The result is a clear and comprehensive history of earth’s previous mass extinctions — and the species we’ve lost — and an engaging description of the extraordinarily complex nature of life. Most important, Kolbert delivers a compelling call to action. “Right now,” she writes, “we are deciding, without quite meaning to, which evolutionary pathways will remain open and which will forever be closed. No other creature has ever managed this, and it will, unfortunately, be our most enduring legacy.”

Kolbert expertly traces the “twisting” intellectual history of how we’ve come to understand the concept of extinction, and more recently, how we’ve come to recognize our role in it. When mastodon bones were first studied, in 1739, many scientists reasoned that the large and unique bones belonged to an elephant or hippopotamus. But in 1796, the French naturalist Georges Cuvier presented evidence of an entirely new theory: The bones belonged to a lost species from “a world previous to ours.” Cuvier collected and studied as many fossils as he could, eventually identifying dozens of extinct species, and over the next several decades, with the contributions of Charles Lyell and Charles Darwin, extinction evolved as a scientific concept.

Since the origin of life on earth 3.8 billion years ago, our planet has experienced five mass extinction events. The last of these events occurred some 66 million years ago when a six-mile-wide asteroid is thought to have collided with earth, wiping out the dinosaurs. The Cretaceous extinction event dramatically changed the composition of biodiversity on the planet: Marine ecosystems essentially collapsed, and about 75 percent of all plant and animal species disappeared.

Today, Kolbert writes, we are witnessing a similar mass extinction event happening in the geologic blink of an eye. According to E. O. Wilson, the present extinction rate in the tropics is “on the order of 10,000 times greater than the naturally occurring background extinction rate” and will reduce biological diversity to its lowest level since the last great extinction.

This time, however, a giant asteroid isn’t to blame — we are, by altering environmental conditions on our planet so swiftly and dramatically that a large proportion of other species cannot adapt. And we are risking our own future as well, by fundamentally altering the integrity of the climate balance that has persisted in more or less the same configuration since the end of the last ice age, and which has fostered the flourishing of human civilization.

As early as the 1840s, scientists noticed large gaps in the fossil record — time periods in which earth’s biodiversity declined rapidly and could not be explained by a static system. Some scientists theorized that abrupt climate changes had caused past mass extinction events. But in the modern era, three factors have combined to radically disrupt the relationship between civilization and the earth’s ecosystem: the unparalleled surge in human population that has quadrupled our numbers in less than a hundred years; the development of powerful new technologies that magnify the per capita impact of all seven billion of us, soon to be nine billion or more; and the emergence of a hegemonic ideology that exalts short-term thinking and ignores the true long-term cost and consequences of the choices we’re making in industry, energy policy, agriculture, forestry and politics.

“People change the world,” Kolbert writes, and she vividly presents the science and history of the current crisis. Her extensive travels in researching this book, and her insightful treatment of both the history and the science all combine to make “The Sixth Extinction” an invaluable contribution to our understanding of present circumstances, just as the paradigm shift she calls for is sorely needed.

Despite the evidence that humanity is driving mass extinctions, we have been woefully slow to adopt the necessary measures to solve this global environmental challenge. Our response to the mass extinction — as well as to the climate crisis — is still controlled by a hopelessly outdated view of our relationship to our environment.

Fortunately, history is full of examples of our capacity to overcome even the most difficult challenges whenever a controversy is finally resolved into a choice between what is clearly right and what is clearly wrong. The anomalies Kolbert identifies are too glaring to ignore. She makes an irrefutable case that what we are doing to cause a sixth mass extinction is clearly wrong. And she makes it clear that doing what is right means accelerating our transition to a more sustainable world.

THE SIXTH EXTINCTION

An Unnatural History

By Elizabeth Kolbert

Illustrated. 319 pp. Henry Holt & Company. $28.

Al Gore, vice president of the United States from 1993 to 2001, is the founder and chairman of the Climate Reality Project, a co-founder and chairman of Generation Investment Management, and the author, most recently, of “The Future: Six Drivers of Global Change.”

California juries are not bashful – they have been known to render massive punitive damages awards that dwarf the award of compensatory (actual) damages. For example, in one securities fraud case jurors awarded $5.7 million in compensatory damages and $165 million in punitive damages. . . . And in a tobacco case with $5.5 million in compensatory damages, the jury awarded $3 billion in punitive damages . . . .

The question, then, is how to get Wall Street banks before a California jury. How about charging them with common law fraud and breach of contract? That’s what the FDIC just did in its massive 24-count civil suit for damages for LIBOR manipulation, filed in March 2014 against sixteen of the world’s largest banks, including the three largest US banks – JP Morgan Chase, Bank of America and Citigroup.

LIBOR (the London Interbank Offering Rate) is the benchmark rate at which banks themselves can borrow. It is a crucial rate involved in over $400 trillion in derivatives called interest-rate swaps, and it is set by the sixteen private megabanks behind closed doors.

The biggest victims of interest-rate swaps have been local governments, universities, pension funds, and other public entities. The banks have made renegotiating these deals prohibitively expensive, and renegotiation itself is an inadequate remedy. It is the equivalent of the grocer giving you an extra potato when you catch him cheating on the scales. A legal action for fraud is a more fitting and effective remedy. Fraud is grounds both for rescission (calling off the deal) as well as restitution (damages), and in appropriate cases punitive damages.

Trapped in a Fraud

Nationally, municipalities and other large non-profits are thought to have as much as $300 billion in outstanding swap contracts based on LIBOR, deals in which they are trapped due to prohibitive termination fees. According to a 2010 report by the SEIU(Service Employees International Union):

The overall effect is staggering. Banks are estimated to have collected as much as $28 billion in termination fees alone from state and local governments over the past two years. This does not even begin to account for the outsized net payments that state and local governments are now making to the banks. . . .

While the press have reported numerous stories of cities like Detroit, caught with high termination payments, the reality is there are hundreds (maybe even thousands) more cities, counties, utility districts, school districts and state governments with swap agreements [that] are causing cash strapped local and city governments to pay millions of dollars in unneeded fees directly to Wall Street.

All of these entities could have damage claims for fraud, breach of contract and rescission; and that is true whether or not they negotiated directly with one of the LIBOR-rigging banks.

To understand why, it is necessary to understand how swaps work. As explained in my last article here, interest-rate swaps are sold to parties who have taken out loans at variable interest rates, as insurance against rising rates. The most common swap is one where counterparty A (a university, municipal government, etc.) pays a fixed rate to counterparty B (the bank), while receiving from B a floating rate indexed to a reference rate such as LIBOR. If interest rates go up, the municipality gets paid more on the swap contract, offsetting its rising borrowing costs. If interest rates go down, the municipality owes money to the bank on the swap, but that extra charge is offset by the falling interest rate on its variable rate loan. The result is to fix borrowing costs at the lower variable rate.

At least, that is how they are supposed to work. The catch is that the swap is a separate financial agreement – essentially an ongoing bet on interest rates. The borrower owes both the interest onits variable rate loan and what it must pay on its separate swap deal. And the benchmarks for the two rates don’t necessarily track each other. The rate owed on the debt is based on something called the SIFMA municipal bond index. The rate owed by the bank is based on the privately-fixed LIBOR rate.

As noted by Stephen Gandel on CNNMoney, when the rate-setting banks started manipulating LIBOR, the two rates decoupled, sometimes radically. Public entities wound up paying substantially more than the fixed rate they had bargained for – a failure of consideration constituting breach of contract. Breach of contract is grounds for rescission and damages.

Pain and Suffering in California

The SEIU report noted that no one has yet completely categorized all the outstanding swap deals entered into by local and state governments. But in a sampling of swaps within California, involving ten cities and counties (San Francisco, Corcoran, Los Angeles, Menlo Park, Oakland, Oxnard, Pittsburgh, Richmond, Riverside, and Sacramento), one community college district, one utility district, one transportation authority, and the state itself, the collective tab was $365 million in swap payments annually, with total termination fees exceeding $1 billion.

Omitted from the sample was the University of California system, which alone is reported to have lost tens of millions of dollars on interest-rate swaps. According to an article in the Orange County Register on February 24, 2014, the swaps now cost the university system an estimated $6 million a year. University accountants estimate that the 10-campus system will lose as much as $136 million over the next 34 years if it remains locked into the deals, losses that would be reduced only if interest rates started to rise. According to the article:

Already officials have been forced to unwind a contract at UC Davis, requiring the university to pay $9 million in termination fees and other costs to several banks. That sum would have covered the tuition and fees of 682 undergraduates for a year.

The university is facing the losses at a time when it is under tremendous financial stress. Administrators have tripled the cost of tuition and fees in the past 10 years, but still can’t cover escalating expenses. Class sizes have increased. Families have been angered by the rising price of attending the university, which has left students in deeper debt.

Peter Taylor, the university’s Chief Financial Officer, defended the swaps, saying he was confident that interest rates would rise in coming years, reversing what the deals have lost. But for that to be true, rates would have to rise by multiples that would drive interest on the soaring federal debt to prohibitive levels, something the Federal Reserve is not likely to allow.

The Revolving Door

The UC’s dilemma is explored in a report titled “Swapping Our Future: How Students and Taxpayers Are Funding Risky UC Borrowing and Wall Street Profits.” The authors, a group called Public Sociologists of Berkeley, say that two factors were responsible for the precipitous decline in interest rates that drove up UC’s relative borrowing costs. One was the move by the Federal Reserve to push interest rates to record lows in order to stabilize the largest banks. The other was the illegal effort by major banks to manipulate LIBOR, which indexes interest rates on most bonds issued by UC.

Why, asked the authors, has UC’s management not tried to renegotiate the deals? They pointed to the revolving door between management and Wall Street. Unlike in earlier years, current and former business and finance executives now play a prominent role on the UC Board of Regents.

They include Chief Financial Officer Taylor, who walked through the revolving door from Lehman Brothers, where he was a top banker in Lehman’s municipal finance business in 2007. That was when the bank sold the university a swap related to debt at UCLA that has now become the source of its biggest swap losses. The university hired Taylor for his $400,000-a-year position in 2009, and he has continued to sign contracts for swaps on its behalf since.

Several very wealthy, politically powerful men are fixtures on the regent’s investment committee, including Richard C. Blum (Wall Streeter, war contractor, and husband of U.S. Senator Dianne Feinstein), and Paul Wachter (Gov. Arnold Schwarzenegger’s long-time business partner and financial advisor). The probability of conflicts of interest inside this committee—as it moves billions of dollars between public and private companies and investment banks—is enormous.

Blum’s firm Blum Capital is also an adviser to CalPERS, the California Public Employees’ Retirement System, which also got caught in the LIBOR-rigging scandal. “Once again,” said CalPERS Chief Investment Officer Joseph Dear of the LIBOR-rigging, “the financial services industry demonstrated that it cannot be trusted to make decisions in the long-term interests of investors.” If the financial services industry cannot be trusted, it needs to be replaced with something that can be.

Remedies

The Public Sociologists of Berkeley recommend renegotiation of the onerous interest rate swaps, which could save up to $200 million for the UC system; and evaluation of the university’s legal options concerning the manipulation of LIBOR. As demonstrated in the new FDIC suit, those options include not just renegotiating on better terms but rescission and damages for fraud and breach of contract. These are remedies that could be sought by local governments and public entities across the state and the nation.

The larger question is why our state and local governments continue to do business with a corrupt global banking cartel. There is an alternative. They could set up their own publicly-owned banks, on the model of the state-owned Bank of North Dakota. Fraud could be avoided, profits could be recaptured, and interest could become a much-needed source of public revenue. Credit could become a public utility, dispensed as needed to benefit local residents and local economies.

The campaign calls for the restructuring of our global food system with the goal of reversing climate change through photosynthesis and biology.

Rodale Institute announced yesterday the launch of a global campaign to generate public awareness of soil’s ability to reverse climate change, but only when the health of the soil is maintained through organic regenerative agriculture. The campaign calls for the restructuring of our global food system with the goal of reversing climate change through photosynthesis and biology.

The white paper states that “We could sequester more than 100% of current annual CO2 emissions with a switch to widely available and inexpensive organic management practices, which we term ‘regenerative organic agriculture.’”

If management of all current cropland shifted to reflect the regenerative model as practiced at the research sites included in the white paper, more than 40 percent of annual emissions could potentially be captured. If, at the same time, all global pasture was managed to a regenerative model, an additional 71 percent could be sequestered. Essentially, passing the 100 percent mark means a drawing down of excess greenhouse gases, resulting in the reversal of the greenhouse effect.

Regenerative organic agriculture is comprised of organic practices including (at a minimum): cover crops, residue mulching, composting and crop rotation. Conservation tillage, while not yet widely used in organic systems, is a regenerative organic practice integral to soil-carbon sequestration. Other biological farming systems that use some of these techniques include ecological, progressive, natural, pro-soil and carbon farming.

“The purpose of our work is singular; we are working to create a massive awakening,” said “Coach” Mark Smallwood, executive director of Rodale Institute.

“Our founder, J.I. Rodale, had a vision so ambitious that many people wrote him off at the time. Almost 75 years later, the organic movement is exploding with growth and fierce determination. But the stakes are much higher in 2014. J.I. saw that agriculture was heading in a dangerous direction by way of the wide-spread adoption of the use of synthetic chemicals and the industrialization of farming. He attempted to prevent that transition. We no longer have the luxury of prevention. Now we are in the dire situation of needing a cure, a reversal. We know that correcting agriculture is an answer to climate chaos, and that it hinges on human behavior. The massive awakening itself is the cure. The future is underfoot. It’s all about healthy soil.”

The Rodale Institute supports its claims by explaining that if sequestration rates attained by the cases cited inside the white paper were achieved on crop and pastureland across the globe, regenerative agriculture could sequester more than our current annual carbon dioxide emissions. Even if modest assumptions about soil’s carbon sequestration potential are made, regenerative agriculture can easily keep annual emissions to within the desirable range necessary if we are to have a good chance of limiting warming to 1.5°C by 2020.

“The white paper is to encourage new research, new policy and the rapid expansion of regenerative agricultural methods,” said Smallwood.

“The media campaign brings the broader vision to the public much faster. The idea is to stoke the public outcry that already exists and to validate those who demand these changes be made now. By engaging the public now, they build the pressure necessary to prevent this call to action from sitting on the desks of scientists and policy-makers, or worse yet, being buried by businesspeople from the chemical industry. We don’t have time to be polite about it.”

Below are three excerpts exemplifying the call to action set forth in the white paper:

Organically managed soils can convert carbon from a greenhouse gas into a food-producing asset. It’s nothing new, and it’s already happening, but it’s not enough. This is the way we have to farm, period.

There’s a technology for massive planetary geo-engineering that’s tried and tested and available for widespread dissemination right now. It costs little and is adaptable to localities the world over. It can be rolled out tomorrow providing multiple benefits beyond climate stabilization. It’s photosynthesis.

The solution is farming like life on Earth matters; farming in a way that restores and even improves on the natural ability of the microbiology present in healthy soil to hold carbon. This kind of farming is called regenerative organic agriculture and it is the solution to climate change we need to implement today.

Since its founding in 1947 by J.I. Rodale, the Rodale Institute has been committed to groundbreaking research in organic agriculture, advocating for policies that support farmers, and educating people about how organic is the safest, healthiest option for people and the planet. The Rodale Institute is home to the Farming Systems Trial, America’s longest-running side-by-side comparison of chemical and organic agriculture. Consistent results from the study have shown that organic yields match or surpass those of conventional farming. In years of drought, organic corn yields are about 30 percent higher. This year, 2013, marks the 33rd year of the trial. New areas of study at the Rodale Institute include rates of carbon sequestration in chemical versus organic plots, new techniques for weed suppression and organic livestock.

America's rich are surging ahead, but the rest are falling behind. What happened?

Photo Credit: Shutterstock.com/Jeanette Dietl

Fancy living up in Canada? Granted, it’s a bit chilly. But the middle class up there has just blown by the U.S. as the world’s most affluent. America’s wealthy are leaping ahead of the rest of much of the globe, but the middle class is falling behind. So are the poor. That’s the sobering news from the latest research put out by LIS, a group based in Luxembourg and the Graduate Center of the City University of New York.

After taxes, the Canadian middle class now has a higher income than its American counterpart. And many European countries are closing in on us. Median incomes in Western European countries are still a bit lower than those of the U.S., but the gap in several countries, including the Netherlands, Sweden and Britain, is significantly smaller than it was a decade ago. However, if you take into account the cost of things like education, retirement and healthcare in America, those European countries’ middle classes are in much better shape than ours because the U.S. government does not provide as much for its citizens in these areas. So the income you get has to be saved for these items.

The report found also found that the median U.S. income, which stands at $18,700, has remained about the same since 2000. And it found that the poor in much of Europe earn more than poor Americans.

So what does Canada have that the U.S. doesn’t have? Well, it has universal healthcare, for one thing. And more unions. And a better social safety net. Ditto with the European countries whose middle classes are better off than ours when you take into account government services.

The LIS researchers found that American families are paying a steep price for high and rising income inequality. Our growth is on par with many other countries, but our middle class and poor aren’t really getting much out of it.

Things have been going downhill for the middle class since 1990, the report shows. Remember anything that got started in those years? Ah, yes! Deregulation. Things were pretty prosperous under Clinton, but by the time you get to the Bush tax cuts, many of which are still with us, the middle class began to get squeezed. Those tax cuts sent more money to the wealthy and simultaneously stripped government investment on things the middle class needs, like public universities.

Conservatives will try to come up with all kinds of nonsense to explain what’s happening to the middle class, and we’ll probably be hearing the old magic mantras about small businesses and regulation. But it’s obvious looking at the historical data that regulation loosened under Bush, but the middle class fared worse. Right now, U.S. states that have pushed deregulation hard, such as those in the South, have been hit particularly hard by the recession. In the big picture, we have been cutting red tape and regulations for three decades now in America. Funny how that coincides with the bad news for the middle class.

We’ve also had massive losses in job in industries that used to flourish, partly because of not enough public investment, and partly because of low demand for goods and services caused by people not having enough money in their pockets to make purchases.

If we don’t want to become a country of fatcats and poor people, we will have to get serious about a couple of things. America has tolerated, and even encouraged, large-scale tax evasion. The big American multinationals like Apple have gotten away with taking advantage of every form of taxpayer investment in research and development, universities that train their workers, etc, and yet the company concocts elaborate schemes to avoid paying anything in taxes.

Obama will get blamed by right wingers, and while it's true that his policies have not done enough for the middle class or the poor and little to curb the growing concentration of wealth at the top, he didn’t create the financial crash and subsequent job losses which sent the 99 percent into a tailspin.

The GOP has to take much of the blame for the crazy idea that tax cuts are the only policy for growth and for its insistence on cutting investment on science, health and infrastructure, not to mention an educational debt story that is disastrous. But the Dems have been talking their austerity-lite nonsense for far too long, and they've been doing very little to help rein in the tax dodgers. There's plenty of blame to go around.

Lynn Parramore is an AlterNet senior editor. She is cofounder of Recessionwire, founding editor of New Deal 2.0, and author of "Reading the Sphinx: Ancient Egypt in Nineteenth-Century Literary Culture." She received her Ph.D. in English and cultural theory from NYU. She is the director of AlterNet's New Economic Dialogue Project. Follow her on Twitter @LynnParramore.

Utopia or BustA Guide to the Present Crisis. By Benjamin Kunkel. Buy this book

Capital in the Twenty-First Century By Thomas Piketty. Translated from the French by Arthur Goldhammer. Buy this book

Marxists were not the only ones convinced that revolution was imminent. A remarkable series of transformations—the corporation’s rise, an unprecedented growth in productive capacity, the knitting together of what a few people had started referring to as a world economy—were redefining social life and what it meant to be a socialist. Restraining monopolies, bolstering labor movements, nationalizing land, instituting progressive taxation, establishing a welfare state—these were no longer the province of a radical fringe. By the end of the nineteenth century, laissez-faire’s obituary had been written so often that William Harcourt, former chancellor of the Exchequer and one of Great Britain’s most influential politicians, could proclaim that “we are all socialists now.”

Harcourt’s socialism was not Marx’s; it was, for example, intended to foil a revolution, not to foment one. At a time when a profusion of competing socialisms vied with each other for prominence, many bore little resemblance to what Marx had sketched (though, with the master dead, what Marx would have preferred also became grounds for dispute). Yet Marx’s successors had at least won an intellectual victory. Talk of a more equitable society had become ubiquitous and, along the way, “capitalism” slipped into the vocabulary, too.

Many, especially on the right, balked at the term. They claimed that “capitalism” was too precise, or not precise enough, or that it put an exaggerated emphasis on the role of capitalists in a system that was larger than any one group, no matter how powerful. Others accepted the word but gave it new meaning. By 1918, one German estimate tallied more than 100 ways of defining capitalism. Even then, it was still a rarity compared with the 1930s, when the Great Depression shoved capitalism—frequently assumed to have entered its final days—into the spotlight.

By the twentieth century, capitalism often seemed less the name for a specific mode of production than a more general way of describing a modern world perpetually overturning itself. With society gripped by changes that were routinely characterized as unparalleled in history, capitalism appeared about as faithful a designation for the new order as any. Yet Marxists never relinquished their proprietary claim to the label. As one of Marx’s translators observed in 1898, “It was the Marxists who forced the discussion of the question, and it is they who are most active in keeping it up.” The German economist Werner Sombart reiterated the point a few years later when he noted, “The concept of capitalism and even more clearly the term itself may be traced primarily to the writings of socialist theoreticians. It has in fact remained one of the key concepts of socialism down to the present time.”

Doubts about capitalism’s analytic utility, however, were not confined to the right. As the historian Howard Brick has demonstrated, throughout much of the twentieth century a substantial contingent of thinkers on the left believed that capitalism was either in the process of giving way to a more advanced mode of economic organization, or that the conversion to a postcapitalist order had already taken place. This perspective enjoyed its greatest prominence in the aftermath of World War II, a period viewed today as the golden age of capitalism but that at the time was also portrayed as the dawning of postcapitalism. States endowed with new powers by wartime victories seemed like they might be on the verge of uncovering a course beyond capitalism and socialism, where the good of society would supersede the exigencies of economics. Marxists flirted with speculations along these lines, too, before the onset of the Cold War hardened previously fluid divisions. Academics continued the debate in the 1960s when proponents of convergence theory argued that both sides of the Iron Curtain had moved toward a common model where bureaucratic efficiency trumped clashing ideologies.

With the riddle of prosperity solved, many on the left assumed that the time had come to address loftier questions: eliminating poverty, expanding civil rights, protecting the environment, and more existential concerns like nurturing individuality in a bureaucratized society. No wonder radicals in the 1960s could insist that “capitalism” wasn’t large enough to capture their critique. Paul Potter, former president of Students for a Democratic Society, complained that the word summoned images of an old left mired in archaic battles from the Great Depression. For Potter, “the system” was larger than capitalism, and “rejection of the old terminology” was “part of the new hope for radical change.”

In the 1970s, visions of a society beyond capitalism or socialism melted away, along with the robust growth rates that had made them plausible. Economic questions returned with a ferocity that made the prophets of postcapitalism appear deluded about the impediments they faced, and the once-imposing schema detailed by social theorists like Talcott Parsons came to seem flabby when contrasted with the remorseless clarity offered by an ascendant economics profession and its corps of mathematicians. Capitalism, now stripped of its explicitly socialist connotations, became a staple in the rhetoric of both left and right. By the end of the decade, it was easier to deny the existence of society—as Margaret Thatcher famously would—than to challenge capitalism’s pre-eminence as a category of analysis.

Socialists might have enjoyed watching the triumph of an idea they had concocted if they had not been busy combating growing dissent within their ranks. These difficulties seemed manageable in the 1970s, when Western governments had many fires of their own to put out. Ten years later, capitalists had regained their footing, while the socialist project continued to decay. Francis Fukuyama’s advertisement for history’s denouement was still on the horizon, but the habits of thinking that would undergird his thesis had already sunk deep roots. Marxism was built upon faith in revolution, but in the West revolution seemed more implausible than ever, and in Eastern Europe the continent’s only widespread revolution had Marxism in its sights. The collapse of communist governments that began in 1989 revealed that history had readied one last twist of the knife: nothing did more to entrench the acceptance of capitalism than the demise of the movement that had invented the concept.

* * *

Socialism and capitalism seem like natural antagonists, but their rivalry is Oedipal. To many, the relationship appears straightforward. Capitalism, they would argue, created the modern industrial working class, which supplied the socialist movement with its staunchest recruits. This story, variations of which reach back to Karl Marx, has been repeated so often that it seems intuitive. But it gets the lines of paternity backward. Capitalism did not create socialism; socialists invented capitalism.

The origins of capitalism could be dated to when someone first traded for profit, though most historians prefer a shorter time line. Even so, scholars tend to agree that something usefully described as capitalism had materialized in parts of the world by 1800, at the latest. But the idea of capitalism took longer to emerge. The word wasn’t coined until the middle of the nineteenth century, and it didn’t enter general usage until decades later.

By that point, socialists had been a familiar force in politics for almost a century. Yet socialism’s founders—figures like Henri de Saint-Simon and Charles Fourier—did not intend to overthrow capitalism. Their aspirations were, if anything, grander. They planned to launch a new religion grounded in principles revealed by another recent discovery: social science. Each half of the formulation—the social and the scientific—mattered equally. For most of the nineteenth century, socialism’s chief opponent was individualism, not capitalism. According to socialism’s pioneering theorists, society was more than a collection of individuals. It was an organism, and it had a distinctive logic of its own—a singular object that could be understood, and controlled, by a singular science. Socialists claimed to have mastered this science, which entitled them to act in society’s name. One of their first tasks would be to replace Christianity, liberating humanity from antiquated prejudices that had undermined revolution in France and could jeopardize future rebellions in Europe.

Socialism, though, was only the latest attempt to grapple with a deeper problem. With the lonely exception of ancient Greece some 2,000 years prior, democracy had been a marginal concept in political debate throughout history. But it returned to life at the close of the eighteenth century, no time more prominently than when Maximilien de Robespierre announced that “the essence” of revolutionary France’s democratic experiment was “equality”—a leveling spirit that could, in theory, be extended to every sphere of collective life.

One year later, Robespierre was dead, and equality’s proselytizers were in retreat, but they would advance again. Egalitarian impulses took many forms, and some of the most fervent acolytes believed they had altered the original model enough to justify a new title for their utopia: socialism. The details of this evolution were complex, but they were captured in the career of a single pamphlet, scribbled by the radical journalist Sylvain Maréchal in the last days of the French Revolution and tucked away in his papers for decades. After finally seeing daylight in 1828, the work became one of the key texts in socialism’s founding. It was named, appropriately, Manifesto of the Equals.

* * *

Though a descendant of rabbis, Marx never fancied himself the leader of a religion. But the prospect of a social science yoked to a political movement that promised a revolution of the oppressed? That warranted a manifesto of its own. Marx wanted to craft a vision of socialism that responded not just to the French Revolution, but also to what historians would later call the Industrial Revolution. It took time for capitalism to become the center of his critique. The Communist Manifesto doesn’t use the word at all, instead reserving its ire for “bourgeois society.” Capital assumed greater importance for Marx as he read deeper in political economy, but he preferred to speak of a “capitalist mode of production,” his label for a system in which labor power was sold like any other commodity and production for markets at a profit had become the rule. Eventually, though, capitalism would assume the place in Marxist thought that society had occupied for the early socialists. The scientific aspirations of the earlier varieties of socialism carried over, but the object of inquiry had shifted. By Marx’s death in 1883, the word had become popular enough that Wilhelm Liebknecht could eulogize Marx as the originator of the social science that “kills capitalism.”

From the beginning, the idea of capitalism was a weapon. Marxists used it to bludgeon their adversaries on the left, whom they could dismiss as utopian dreamers blind to the realities of life under capital’s rule. As Marx’s son-in-law Paul Lafargue would declare, communists were “men of science, who do not invent societies but who will rescue them from capitalism.” But the Marxist interpretation of capitalism was also the product of a particular way of thinking. “Totality” and “dialectics” were the key words of its philosophy, and its politics concentrated on revolution. Together, they promised a complete overhaul of society. Focusing on capitalism helped guide attacks on a bourgeois status quo that might otherwise have seemed impervious to change. Visions of the cohesive socialism to come nurtured the belief that there was a fixed and antithetical entity in the present to oppose. All that socialists needed to seal their victory was a revolution, which capitalism’s contradictions would deliver to them.

Thomas Piketty, professor at the Paris School of Economics, isn’t a household name, although that may change with the English-language publication of his magnificent, sweeping meditation on inequality, Capital in the Twenty-First Century. Yet his influence runs deep. It has become a commonplace to say that we are living in a second Gilded Age—or, as Piketty likes to put it, a second Belle Époque—defined by the incredible rise of the “one percent.” But it has only become a commonplace thanks to Piketty’s work. In particular, he and a few colleagues (notably Anthony Atkinson at Oxford and Emmanuel Saez at Berkeley) have pioneered statistical techniques that make it possible to track the concentration of income and wealth deep into the past—back to the early twentieth century for America and Britain, and all the way to the late eighteenth century for France.

The result has been a revolution in our understanding of long-term trends in inequality. Before this revolution, most discussions of economic disparity more or less ignored the very rich. Some economists (not to mention politicians) tried to shout down any mention of inequality at all: “Of the tendencies that are harmful to sound economics, the most seductive, and in my opinion the most poisonous, is to focus on questions of distribution,” declared Robert Lucas Jr. of the University of Chicago, the most influential macroeconomist of his generation, in 2004. But even those willing to discuss inequality generally focused on the gap between the poor or the working class and the merely well-off, not the truly rich—on college graduates whose wage gains outpaced those of less-educated workers, or on the comparative good fortune of the top fifth of the population compared with the bottom four fifths, not on the rapidly rising incomes of executives and bankers.

It therefore came as a revelation when Piketty and his colleagues showed that incomes of the now famous “one percent,” and of even narrower groups, are actually the big story in rising inequality. And this discovery came with a second revelation: talk of a second Gilded Age, which might have seemed like hyperbole, was nothing of the kind. In America in particular the share of national income going to the top one percent has followed a great U-shaped arc. Before World War I the one percent received around a fifth of total income in both Britain and the United States. By 1950 that share had been cut by more than half. But since 1980 the one percent has seen its income share surge again—and in the United States it’s back to what it was a century ago.

Still, today’s economic elite is very different from that of the nineteenth century, isn’t it? Back then, great wealth tended to be inherited; aren’t today’s economic elite people who earned their position? Well, Piketty tells us that this isn’t as true as you think, and that in any case this state of affairs may prove no more durable than the middle-class society that flourished for a generation after World War II. The big idea of Capital in the Twenty-First Century is that we haven’t just gone back to nineteenth-century levels of income inequality, we’re also on a path back to “patrimonial capitalism,” in which the commanding heights of the economy are controlled not by talented individuals but by family dynasties.

It’s a remarkable claim—and precisely because it’s so remarkable, it needs to be examined carefully and critically. Before I get into that, however, let me say right away that Piketty has written a truly superb book. It’s a work that melds grand historical sweep—when was the last time you heard an economist invoke Jane Austen and Balzac?—with painstaking data analysis. And even though Piketty mocks the economics profession for its “childish passion for mathematics,” underlying his discussion is a tour de force of economic modeling, an approach that integrates the analysis of economic growth with that of the distribution of income and wealth. This is a book that will change both the way we think about society and the way we do economics.

1.

What do we know about economic inequality, and about when do we know it? Until the Piketty revolution swept through the field, most of what we knew about income and wealth inequality came from surveys, in which randomly chosen households are asked to fill in a questionnaire, and their answers are tallied up to produce a statistical portrait of the whole. The international gold standard for such surveys is the annual survey conducted once a year by the Census Bureau. The Federal Reserve also conducts a triennial survey of the distribution of wealth.

These two surveys are an essential guide to the changing shape of American society. Among other things, they have long pointed to a dramatic shift in the process of US economic growth, one that started around 1980. Before then, families at all levels saw their incomes grow more or less in tandem with the growth of the economy as a whole. After 1980, however, the lion’s share of gains went to the top end of the income distribution, with families in the bottom half lagging far behind.

Historically, other countries haven’t been equally good at keeping track of who gets what; but this situation has improved over time, in large part thanks to the efforts of the Luxembourg Income Study (with which I will soon be affiliated). And the growing availability of survey data that can be compared across nations has led to further important insights. In particular, we now know both that the United States has a much more unequal distribution of income than other advanced countries and that much of this difference in outcomes can be attributed directly to government action. European nations in general have highly unequal incomes from market activity, just like the United States, although possibly not to the same extent. But they do far more redistribution through taxes and transfers than America does, leading to much less inequality in disposable incomes.

Yet for all their usefulness, survey data have important limitations. They tend to undercount or miss entirely the income that accrues to the handful of individuals at the very top of the income scale. They also have limited historical depth. Even US survey data only take us to 1947.

Enter Piketty and his colleagues, who have turned to an entirely different source of information: tax records. This isn’t a new idea. Indeed, early analyses of income distribution relied on tax data because they had little else to go on. Piketty et al. have, however, found ways to merge tax data with other sources to produce information that crucially complements survey evidence. In particular, tax data tell us a great deal about the elite. And tax-based estimates can reach much further into the past: the United States has had an income tax since 1913, Britain since 1909. France, thanks to elaborate estate tax collection and record-keeping, has wealth data reaching back to the late eighteenth century.

Exploiting these data isn’t simple. But by using all the tricks of the trade, plus some educated guesswork, Piketty is able to produce a summary of the fall and rise of extreme inequality over the course of the past century. It looks like Table 1 on this page.

As I said, describing our current era as a new Gilded Age or Belle Époque isn’t hyperbole; it’s the simple truth. But how did this happen?

2.

Piketty throws down the intellectual gauntlet right away, with his book’s very title: Capital in the Twenty-First Century. Are economists still allowed to talk like that?

It’s not just the obvious allusion to Marx that makes this title so startling. By invoking capital right from the beginning, Piketty breaks ranks with most modern discussions of inequality, and hearkens back to an older tradition.

The general presumption of most inequality researchers has been that earned income, usually salaries, is where all the action is, and that income from capital is neither important nor interesting. Piketty shows, however, that even today income from capital, not earnings, predominates at the top of the income distribution. He also shows that in the past—during Europe’s Belle Époque and, to a lesser extent, America’s Gilded Age—unequal ownership of assets, not unequal pay, was the prime driver of income disparities. And he argues that we’re on our way back to that kind of society. Nor is this casual speculation on his part. For all that Capital in the Twenty-First Century is a work of principled empiricism, it is very much driven by a theoretical frame that attempts to unify discussion of economic growth and the distribution of both income and wealth. Basically, Piketty sees economic history as the story of a race between capital accumulation and other factors driving growth, mainly population growth and technological progress.

To be sure, this is a race that can have no permanent victor: over the very long run, the stock of capital and total income must grow at roughly the same rate. But one side or the other can pull ahead for decades at a time. On the eve of World War I, Europe had accumulated capital worth six or seven times national income. Over the next four decades, however, a combination of physical destruction and the diversion of savings into war efforts cut that ratio in half. Capital accumulation resumed after World War II, but this was a period of spectacular economic growth—the Trente Glorieuses, or “Glorious Thirty” years; so the ratio of capital to income remained low. Since the 1970s, however, slowing growth has meant a rising capital ratio, so capital and wealth have been trending steadily back toward Belle Époque levels. And this accumulation of capital, says Piketty, will eventually recreate Belle Époque–style inequality unless opposed by progressive taxation.

Why? It’s all about r versus g—the rate of return on capital versus the rate of economic growth.

Just about all economic models tell us that if g falls—which it has since 1970, a decline that is likely to continue due to slower growth in the working-age population and slower technological progress—r will fall too. But Piketty asserts that r will fall less than g. This doesn’t have to be true. However, if it’s sufficiently easy to replace workers with machines—if, to use the technical jargon, the elasticity of substitution between capital and labor is greater than one—slow growth, and the resulting rise in the ratio of capital to income, will indeed widen the gap between r and g. And Piketty argues that this is what the historical record shows will happen.

If he’s right, one immediate consequence will be a redistribution of income away from labor and toward holders of capital. The conventional wisdom has long been that we needn’t worry about that happening, that the shares of capital and labor respectively in total income are highly stable over time. Over the very long run, however, this hasn’t been true. In Britain, for example, capital’s share of income—whether in the form of corporate profits, dividends, rents, or sales of property, for example—fell from around 40 percent before World War I to barely 20 percent circa 1970, and has since bounced roughly halfway back. The historical arc is less clear-cut in the United States, but here, too, there is a redistribution in favor of capital underway. Notably, corporate profits have soared since the financial crisis began, while wages—including the wages of the highly educated—have stagnated.

A rising share of capital, in turn, directly increases inequality, because ownership of capital is always much more unequally distributed than labor income. But the effects don’t stop there, because when the rate of return on capital greatly exceeds the rate of economic growth, “the past tends to devour the future”: society inexorably tends toward dominance by inherited wealth.

Consider how this worked in Belle Époque Europe. At the time, owners of capital could expect to earn 4–5 percent on their investments, with minimal taxation; meanwhile economic growth was only around one percent. So wealthy individuals could easily reinvest enough of their income to ensure that their wealth and hence their incomes were growing faster than the economy, reinforcing their economic dominance, even while skimming enough off to live lives of great luxury.

And what happened when these wealthy individuals died? They passed their wealth on—again, with minimal taxation—to their heirs. Money passed on to the next generation accounted for 20 to 25 percent of annual income; the great bulk of wealth, around 90 percent, was inherited rather than saved out of earned income. And this inherited wealth was concentrated in the hands of a very small minority: in 1910 the richest one percent controlled 60 percent of the wealth in France; in Britain, 70 percent.

No wonder, then, that nineteenth-century novelists were obsessed with inheritance. Piketty discusses at length the lecture that the scoundrel Vautrin gives to Rastignac in Balzac’s Père Goriot, whose gist is that a most successful career could not possibly deliver more than a fraction of the wealth Rastignac could acquire at a stroke by marrying a rich man’s daughter. And it turns out that Vautrin was right: being in the top one percent of nineteenth-century heirs and simply living off your inherited wealth gave you around two and a half times the standard of living you could achieve by clawing your way into the top one percent of paid workers.

You might be tempted to say that modern society is nothing like that. In fact, however, both capital income and inherited wealth, though less important than they were in the Belle Époque, are still powerful drivers of inequality—and their importance is growing. In France, Piketty shows, the inherited share of total wealth dropped sharply during the era of wars and postwar fast growth; circa 1970 it was less than 50 percent. But it’s now back up to 70 percent, and rising. Correspondingly, there has been a fall and then a rise in the importance of inheritance in conferring elite status: the living standard of the top one percent of heirs fell below that of the top one percent of earners between 1910 and 1950, but began rising again after 1970. It’s not all the way back to Rasti-gnac levels, but once again it’s generally more valuable to have the right parents (or to marry into having the right in-laws) than to have the right job.

And this may only be the beginning. Figure 1 on this page shows Piketty’s estimates of global r and g over the long haul, suggesting that the era of equalization now lies behind us, and that the conditions are now ripe for the reestablishment of patrimonial capitalism.

Given this picture, why does inherited wealth play as small a part in today’s public discourse as it does? Piketty suggests that the very size of inherited fortunes in a way makes them invisible: “Wealth is so concentrated that a large segment of society is virtually unaware of its existence, so that some people imagine that it belongs to surreal or mysterious entities.” This is a very good point. But it’s surely not the whole explanation. For the fact is that the most conspicuous example of soaring inequality in today’s world—the rise of the very rich one percent in the Anglo-Saxon world, especially the United States—doesn’t have all that much to do with capital accumulation, at least so far. It has more to do with remarkably high compensation and incomes.

3.

Capital in the Twenty-First Century is, as I hope I’ve made clear, an awesome work. At a time when the concentration of wealth and income in the hands of a few has resurfaced as a central political issue, Piketty doesn’t just offer invaluable documentation of what is happening, with unmatched historical depth. He also offers what amounts to a unified field theory of inequality, one that integrates economic growth, the distribution of income between capital and labor, and the distribution of wealth and income among individuals into a single frame.

And yet there is one thing that slightly detracts from the achievement—a sort of intellectual sleight of hand, albeit one that doesn’t actually involve any deception or malfeasance on Piketty’s part. Still, here it is: the main reason there has been a hankering for a book like this is the rise, not just of the one percent, but specifically of the American one percent. Yet that rise, it turns out, has happened for reasons that lie beyond the scope of Piketty’s grand thesis.

Piketty is, of course, too good and too honest an economist to try to gloss over inconvenient facts. “US inequality in 2010,” he declares, “is quantitatively as extreme as in old Europe in the first decade of the twentieth century, but the structure of that inequality is rather clearly different.” Indeed, what we have seen in America and are starting to see elsewhere is something “radically new”—the rise of “supersalaries.”

Capital still matters; at the very highest reaches of society, income from capital still exceeds income from wages, salaries, and bonuses. Piketty estimates that the increased inequality of capital income accounts for about a third of the overall rise in US inequality. But wage income at the top has also surged. Real wages for most US workers have increased little if at all since the early 1970s, but wages for the top one percent of earners have risen 165 percent, and wages for the top 0.1 percent have risen 362 percent. If Rastignac were alive today, Vautrin might concede that he could in fact do as well by becoming a hedge fund manager as he could by marrying wealth.

What explains this dramatic rise in earnings inequality, with the lion’s share of the gains going to people at the very top? Some US economists suggest that it’s driven by changes in technology. In a famous 1981 paper titled “The Economics of Superstars,” the Chicago economist Sherwin Rosen argued that modern communications technology, by extending the reach of talented individuals, was creating winner-take-all markets in which a handful of exceptional individuals reap huge rewards, even if they’re only modestly better at what they do than far less well paid rivals.

Piketty is unconvinced. As he notes, conservative economists love to talk about the high pay of performers of one kind or another, such as movie and sports stars, as a way of suggesting that high incomes really are deserved. But such people actually make up only a tiny fraction of the earnings elite. What one finds instead is mainly executives of one sort or another—people whose performance is, in fact, quite hard to assess or give a monetary value to.

Who determines what a corporate CEO is worth? Well, there’s normally a compensation committee, appointed by the CEO himself. In effect, Piketty argues, high-level executives set their own pay, constrained by social norms rather than any sort of market discipline. And he attributes skyrocketing pay at the top to an erosion of these norms. In effect, he attributes soaring wage incomes at the top to social and political rather than strictly economic forces.

Now, to be fair, he then advances a possible economic analysis of changing norms, arguing that falling tax rates for the rich have in effect emboldened the earnings elite. When a top manager could expect to keep only a small fraction of the income he might get by flouting social norms and extracting a very large salary, he might have decided that the opprobrium wasn’t worth it. Cut his marginal tax rate drastically, and he may behave differently. And as more and more of the supersalaried flout the norms, the norms themselves will change.

There’s a lot to be said for this diagnosis, but it clearly lacks the rigor and universality of Piketty’s analysis of the distribution of and returns to wealth. Also, I don’t think Capital in the Twenty-First Century adequately answers the most telling criticism of the executive power hypothesis: the concentration of very high incomes in finance, where performance actually can, after a fashion, be evaluated. I didn’t mention hedge fund managers idly: such people are paid based on their ability to attract clients and achieve investment returns. You can question the social value of modern finance, but the Gordon Gekkos out there are clearly good at something, and their rise can’t be attributed solely to power relations, although I guess you could argue that willingness to engage in morally dubious wheeling and dealing, like willingness to flout pay norms, is encouraged by low marginal tax rates.

Overall, I’m more or less persuaded by Piketty’s explanation of the surge in wage inequality, though his failure to include deregulation is a significant disappointment. But as I said, his analysis here lacks the rigor of his capital analysis, not to mention its sheer, exhilarating intellectual elegance.

Yet we shouldn’t overreact to this. Even if the surge in US inequality to date has been driven mainly by wage income, capital has nonetheless been significant too. And in any case, the story looking forward is likely to be quite different. The current generation of the very rich in America may consist largely of executives rather than rentiers, people who live off accumulated capital, but these executives have heirs. And America two decades from now could be a rentier-dominated society even more unequal than Belle Époque Europe.

But this doesn’t have to happen.

4.

At times, Piketty almost seems to offer a deterministic view of history, in which everything flows from the rates of population growth and technological progress. In reality, however, Capital in the Twenty-First Century makes it clear that public policy can make an enormous difference, that even if the underlying economic conditions point toward extreme inequality, what Piketty calls “a drift toward oligarchy” can be halted and even reversed if the body politic so chooses.

The key point is that when we make the crucial comparison between the rate of return on wealth and the rate of economic growth, what matters is the after-tax return on wealth. So progressive taxation—in particular taxation of wealth and inheritance—can be a powerful force limiting inequality. Indeed, Piketty concludes his masterwork with a plea for just such a form of taxation. Unfortunately, the history covered in his own book does not encourage optimism.

It’s true that during much of the twentieth century strongly progressive taxation did indeed help reduce the concentration of income and wealth, and you might imagine that high taxation at the top is the natural political outcome when democracy confronts high inequality. Piketty, however, rejects this conclusion; the triumph of progressive taxation during the twentieth century, he contends, was “an ephemeral product of chaos.” Absent the wars and upheavals of Europe’s modern Thirty Years’ War, he suggests, nothing of the kind would have happened.

As evidence, he offers the example of France’s Third Republic. The Republic’s official ideology was highly egalitarian. Yet wealth and income were nearly as concentrated, economic privilege almost as dominated by inheritance, as they were in the aristocratic constitutional monarchy across the English Channel. And public policy did almost nothing to oppose the economic domination by rentiers: estate taxes, in particular, were almost laughably low.

Why didn’t the universally enfranchised citizens of France vote in politicians who would take on the rentier class? Well, then as now great wealth purchased great influence—not just over policies, but over public discourse. Upton Sinclair famously declared that “it is difficult to get a man to understand something when his salary depends on his not understanding it.” Piketty, looking at his own nation’s history, arrives at a similar observation: “The experience of France in the Belle Époque proves, if proof were needed, that no hypocrisy is too great when economic and financial elites are obliged to defend their interest.”

The same phenomenon is visible today. In fact, a curious aspect of the American scene is that the politics of inequality seem if anything to be running ahead of the reality. As we’ve seen, at this point the US economic elite owes its status mainly to wages rather than capital income. Nonetheless, conservative economic rhetoric already emphasizes and celebrates capital rather than labor—“job creators,” not workers.

In 2012 Eric Cantor, the House majority leader, chose to mark Labor Day—Labor Day!—with a tweet honoring business owners:

Today, we celebrate those who have taken a risk, worked hard, built a business and earned their own success.

Perhaps chastened by the reaction, he reportedly felt the need to remind his colleagues at a subsequent GOP retreat that most people don’t own their own businesses—but this in itself shows how thoroughly the party identifies itself with capital to the virtual exclusion of labor.

Nor is this orientation toward capital just rhetorical. Tax burdens on high-income Americans have fallen across the board since the 1970s, but the biggest reductions have come on capital income—including a sharp fall in corporate taxes, which indirectly benefits stockholders—and inheritance. Sometimes it seems as if a substantial part of our political class is actively working to restore Piketty’s patrimonial capitalism. And if you look at the sources of political donations, many of which come from wealthy families, this possibility is a lot less outlandish than it might seem.

Piketty ends Capital in the Twenty-First Century with a call to arms—a call, in particular, for wealth taxes, global if possible, to restrain the growing power of inherited wealth. It’s easy to be cynical about the prospects for anything of the kind. But surely Piketty’s masterly diagnosis of where we are and where we’re heading makes such a thing considerably more likely. So Capital in the Twenty-First Century is an extremely important book on all fronts. Piketty has transformed our economic discourse; we’ll never talk about wealth and inequality the same way we used to.

April 19, 2014

The coming of tax day provides a great opportunity for everyone to focus on their favorite tax break, and there are many from which to choose. However for all the sneaky and squirrelly ways that the rich use to escape their tax liability, none can beat the hedge fund managers’ tax break.

The coming of tax day provides a great opportunity for everyone to focus on their favorite tax break, and there are many from which to choose. However for all the sneaky and squirrelly ways that the rich use to escape their tax liability, none can beat the hedge fund managers’ tax break. This is the way the rich tell the rest of us, because they are rich and powerful, the law doesn’t apply to them.

The hedge fund managers’ tax break, which is also known as the carried interest tax deduction, is different from other tax breaks in that it has no economic rationale. With most other tax breaks there is at least an argument as to how it serves some socially useful purpose. That is not the case with the hedge fund managers’ tax break. This is simply a case where the rich don’t feel like paying taxes and are saying to the rest of us, "what are you going to do about it?"

The hedge fund managers’ tax break applies to the portion of their earnings that are contingent on the performance of their fund. It’s standard for hedge fund managers to be paid a flat fee of 1-2 percent of the money they manage. In addition, they will typically get performance pay that is equal to 10-20 percent of what the fund earns above some threshold. Managers of private equity funds and real estate investment trusts have similar arrangements with the same tax break.

The portion of their pay that depends on the fund’s performance is the "carried interest." It often runs into the tens of millions or even hundreds of millions of dollars. While this money is clearly and explicitly pay for the work of managing the fund, under the current tax law managers get to have this income taxed at the capital gains rate.

This translates into a huge savings for the fund managers. If their earnings were taxed as normal income they would pay a 39.6 percent tax rate, compared to just a 20 percent capital gains tax rate. For a successful manager earning $10 million, the savings come to $1,960,000. If they earned $100 million, the savings would be equal to $19,600,000.

The Wall Streeters arguments as to why they shouldn’t have to pay the same tax rate as everyone else are basically just jokes. They have paid lobbyists to write lengthy papers explaining that carried interest is not really a payment for earnings, it rather it is the profits from a put option on the assets of the fund.

Of course a realtor or a car salesperson could make the same argument about the portion of their pay that is contingent on their sales. The 6 percent fee charged by the realtor is not really pay for their work, it is a put option for a portion of the sales price of the house. Unfortunately for realtors they don’t have enough money to force members of Congress and the media to take this nonsense seriously.

The other line the hedge fund managers argue is that it is good for the managers to have their interests allied with the investors in their fund. If what the managers take home depends on what the fund earns, they will have more incentive to ensure the fund does well.

This is a fine argument, but it has nothing to do with why the taxpayers should subsidize their income. There is no reason they can’t sign contracts with their investors which will require that either the fund managers put up a substantial portion of their money upfront or reinvest a portion of their overhead fee, so that they will have their own money at stake. Such contracts are simple to write and they have the great benefit that they don’t require the taxpayer’s money.

The fund managers’ tax break first became a major political issue seven years ago. It seemed so obviously corrupt that it couldn’t stand up in the light of day. When I first heard about it from a friend I assumed that he had misunderstood its nature since no tax break could be such a blatant give away to the rich. I then looked it up and realized that he was right.

I then asked a prominent conservative economist how he would justify this tax break. He told me that the fund managers are rich and powerful people. I assured him I knew this, but I wanted to know what sort of economic rationale there could be for this sort of tax break. He said there isn’t one.

So there you have it. The richest people in the country don’t pay their taxes because they don’t feel like it. Happy Tax Day.

The Divide

“The Divide: American Injustice in the Age of the Wealth Gap” A book by Matt Taibbi

Matt Taibbi has come a long way since the 1990s, when he co-edited a riotous expatriate newspaper in Moscow. For five years, Taibbi churned out the Gonzo, Slavic style, mixing satire and pranks with scathing opinion and analysis. Although he also played in the Mongolian Basketball Association, his time abroad wasn’t all fun and games. In the early 1990s, the Russian government began auctioning off shares of state enterprises, which Taibbi described as “the biggest thefts in the history of the human race.” He noted the calamitous effects of privatization on average Russians and scorned the American consultants who descended on Moscow to coordinate the auction. “Looking at their bright, happy faces,” Taibbi wrote, “you’d never guess that these were the people who’d had the balls to tell millions of Russians that their jobs and benefits needed to be sacrificed for the sake of ‘competitiveness.’ ”

Rather than lament the evils of neoliberalism, Taibbi chose to mock the carpetbaggers. “There was no point in fighting fair against people like this,” he claimed in his first co-authored book, “The Exile: Sex, Drugs, and Libel in the New Russia” (2000). “Humorless lefties like Ralph Nader had been doing that for decades, much more effectively and with greater attention than we ever could, to very little result.” He decided to “loathe the corporate henchmen not for what they did, but for who they were.” His goal was to “embarrass them socially, pick on their looks and their mannerisms and speech, expose them as people.”

In 2002, Taibbi returned to the United States with his attitude intact. When an alternative weekly hired him to cover the 2004 Democratic primaries, he struggled to find a satisfactory way to report on the absurdities he witnessed. He began showing up for work on mushrooms or in a gorilla suit; at one point, he played the hunger artist, forgoing food for a week and taking careful notes on what the other reporters were ingesting. Toward the end of his fast, he dropped two hits of acid, donned a Viking costume and tried to interview a campaign staffer.

Again, the Gonzo influence was unmistakable. Taibbi’s first solo book, “Spanking the Donkey: On the Campaign Trail With the Democrats” (2005), was an updated version of Hunter Thompson’s “Fear and Loathing: On the Campaign Trail ’72,” which was praised as the least factual and most accurate account of that presidential race. Taibbi even itemized the contents of his car trunk, as Thompson did at the beginning of “Fear and Loathing in Las Vegas.” It was therefore fitting that Rolling Stone magazine, which helped make Thompson a cultural icon, hired Taibbi as a contributing editor.

Having documented America’s political and cultural atrocities in “Smells Like Dead Elephants: Dispatches From a Rotting Empire” (2007) and “The Great Derangement: A Terrifying True Story of War, Politics & Religion at the Twilight of the American Empire” (2008), Taibbi turned his attention to Wall Street, whose greed, negligence and fraud helped crater the global economy. In some ways, that story was a return to the rapacity he had witnessed in Russia, but Taibbi was even more outraged by the effect of the crash on average citizens—this time, his compatriots. In July 2009, Rolling Stone published his exposé of Goldman Sachs, the investment bank that Taibbi described as “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.” A few business press regulars challenged the story’s details, and others were put off by its extravagant style. In the end, however, their criticisms were surprisingly weak, attempts to defend Goldman Sachs were risible and subsequent reporting confirmed Taibbi’s basic claims.

Given the number of serious publications that cover Wall Street, it was remarkable that Taibbi’s piece appeared in Rolling Stone. His critics may have hoped the story’s provenance would make it easier to dismiss, but Taibbi cleaned their clocks in print and on television. It was another reminder that Rolling Stone has never been an ordinary music magazine. Before launching it in 1967, Jann Wenner and Ralph Gleason worked at Ramparts magazine, the legendary San Francisco muckraker that ran high-impact stories on Vietnam and the CIA. Taibbi’s piece proved that Rolling Stone knew how to apply the old Ramparts formula, which Adam Hochschild, another alumnus of that magazine and co-founder of Mother Jones, put this way: “Find an exposé that major newspapers are afraid to touch, publish it with a big enough splash so they can’t afford to ignore it, and then publicize it in a way that plays the press off against each other.” The Goldman Sachs story helped revive Rolling Stone’s political coverage, and the magazine has been on a tear ever since, landing two George Polk Awards for investigative reporting in the last four years.

In his next book, “Griftopia: Bubble Machines, Vampire Squids, and the Long Con That Is Breaking America” (2010), Taibbi broadened his attack on high finance. One of his targets was former Federal Reserve Chairman Alan Greenspan, whom business reporters had long revered. When the stock bubble popped in 1999, Time magazine cast Greenspan as a member of the “Committee to Save the World.” Taibbi felt no such reverence; in fact, he regarded the Fed chair’s penchant for deregulation, low interest rates and Wall Street bailouts as an important source of the bubble in the first place. Characteristically, Taibbi made his critique personal. Greenspan was a “gnomish bug-eyed party crasher” who “flattered and bullshitted his way to the top,” and then turned the Federal Reserve into “a permanent bailout mechanism for the super-rich.” But Taibbi did more than impugn his targets; he also explained the intricacies of Wall Street’s labyrinthine hustles to general readers. That combination of bombast and clear explication made his claims increasingly difficult to ignore or refute.

Eventually the SEC and Justice Department began to stir. The same year “Griftopia” appeared, Goldman Sachs paid $550 million to settle charges that it misled investors about a subprime mortgage product. It was the largest SEC penalty ever paid by a single firm. Two years later, Citigroup paid $590 million to settle similar claims, and last year, JPMorgan Chase settled with the Justice Department for $13 billion, including a $3 billion penalty for its role in selling low-quality mortgage-backed securities. Despite the immense scale of the subprime grift, none of the major offenders faced criminal prosecution.

The Goldman Sachs story dramatically raised Taibbi’s media profile. But where would he go next? Given the government’s refusal to prosecute Wall Street bankers, it was perhaps natural that he would turn his attention to the legal system. In his latest book, “The Divide: American Injustice in the Age of the Wealth Gap,” Taibbi explores why Wall Street bankers are seemingly exempt from criminal prosecution, even as New York City targets petty crime—much of it manufactured by police in minority neighborhoods—more aggressively than ever. He cites statistics to make his argument, but mostly he reports on specific cases. One involves a working-class black man who finally decided to fight a misdemeanor charge for blocking pedestrian traffic—that is, standing on the sidewalk in front of his home. Taibbi also considers the zeal with which government agencies investigate and humiliate welfare recipients and undocumented residents for trying to provide for their families during hard times—times made all the harder because of unprosecuted crimes at the top of the economic food chain.

Everyone knows the rich receive special treatment in this country, especially in court. But Taibbi concludes that the government now offers a sliding scale of civil and criminal protection to U.S. residents. At one end of the spectrum, the very rich are virtually beyond accountability, no matter how massive and destructive their crimes may be. At the other end, the nation’s most vulnerable residents face unremitting investigation and prosecution by bureaucracies determined to find them guilty of something.

Taibbi also surfaces a new set of targets: Justice Department prosecutors who seek settlements for even the most outrageous white-collar scams. Many of them are recruited from law firms whose clients include the largest Wall Street banks. Lanny Breuer, who headed the department’s criminal division when the financial meltdown occurred, is Taibbi’s poster boy for this conflict of interest. Both he and Attorney General Eric Holder were partners at Covington & Burling, which represents JPMorgan Chase, Bank of America, Citigroup and Wells Fargo. All too often, Taibbi argues, the prosecutors have continued to behave like defense attorneys. When Holder was a Clinton administration official, for example, he wrote a memo arguing that prosecutors should consider “collateral consequences” when determining whether to charge persons or corporations. If a criminal prosecution would unduly harm innocent shareholders and employees, the logic went, it made more sense to settle. But once bankers realized they were beyond criminal prosecution, the incentives to transgress increased dramatically.

Taibbi illustrates the Justice Department’s “complete regulatory surrender” by briefly recounting the Hong Kong and Shanghai Banking Corporation case of 2012. HSBC admitted to laundering billions of dollars for Mexican and Colombian drug cartels, accepting $500,000 per day from Russian mobsters, working with banks connected to al-Qaida and facilitating deals with the sanctioned state of Iran. At a news conference, Breuer proudly announced that HSBC would pay a fine of $1.9 billion—less than 10 percent of that bank’s earnings for a single year. “I don’t think the bank got off easy,” Breuer said. A dubious Forbes magazine asked, “What’s a bank got to do to get into some real trouble around here?” The New York Times agreed: “Clearly, the government has bought into the notion that too big to fail is too big to jail.”

It got worse. When Swiss banking giant UBS was nailed for rigging Libor rates, which affected the price of trillions of dollars worth of financial products, Breuer lamely defended the $1.5 billion settlement at a news conference before Holder stepped in. “I’m not talking about just this case,” Holder said, “but in others we have resolved, the impact on the stability of financial markets around the world is something that we take into consideration.”

As with the Goldman Sachs story, other journalists have confirmed Taibbi’s major claims. Writing for Salon, David Dayen called attention to an article in American Lawyer that congratulated Covington & Burling for allowing its banking clients to escape justice “with very little damage.” One client “got off with just a $5 million fine,” while another “was fined just $75,000” for allegedly misleading investors about the firm’s subprime exposure. The article even quoted Breuer, who returned to Covington & Burling after his stint in the Justice Department. “Marrying regulatory expertise with white-collar lawyers is an extraordinary advantage,” Breuer said. For Dayen, the American Lawyer piece was a teachable moment. “Ex-regulators like Lanny Breuer can make millions defending the clients they used to regulate,” he wrote. “And with few exceptions, it’s all perfectly legal. We just don’t usually get to see the scheme displayed so obviously and transparently as it is in these marketing materials.”

In her New York Times column, Gretchen Morgenson also highlighted the Justice Department’s kid-gloves approach to Wall Street fraud. Citing a report by the department’s own inspector general, Morgenson noted that the FBI ranked complex financial crimes as the lowest priority of the six criminal threats within its area of responsibility. Moreover, the same report ranked mortgage fraud as the lowest threat within the complex financial crimes category. That report, Georgetown law professor Adam Levitin said, “confirmed what’s been clear for quite a while—that the D.O.J. has never taken mortgage fraud seriously.” Breuer declined to comment for Morgenson’s piece, but former Delaware Sen. Edward Kaufman, who now teaches law at Duke University, was more forthcoming. “The report fits a pattern that is scary for a democracy, that there really are two levels of justice in this country, one for the people with power and money and one for everyone else,” Kaufman said. “And that eats at the heart of what I think makes this country great.”

“The Divide” marks a shift in Taibbi’s tone. More Lincoln Steffens than Hunter Thompson, Taibbi drops most of the histrionics to reveal the corruption and injustice at hand. He even goes out of his way to be reasonable. He acknowledges that prosecuting financial cases can be expensive and risky, especially when the alleged crimes are complex and the defendants have vast legal resources at their disposal. That fact motivates prosecutors to settle such cases rather than try them in criminal court. He also concedes that many disadvantaged neighborhoods may benefit from tough policing. But he maintains that when combined, the two law-enforcement strategies add up to a glaring injustice. He also notes that it’s far too easy to introduce jurisdictional complications in financial cases that would never be allowed in less consequential cases. To make that point, he recounts a horrific case in which high-profile Wall Street financiers escaped punishment after trying to destroy a company they bet against as well as harassing its executives and their family members.

Taibbi’s is an important voice, especially in today’s media ecology. Support for investigative reporting has never been a given; when it comes to muckraking, you take it where you can get it. Taibbi has shown that he can deliver the goods, and “The Divide” is his most important book-length contribution to date. One wonders what the future holds for him. In February, he announced he was leaving Rolling Stone to join First Look Media, where his website will feature investigative stories with a satirical edge. In describing his new venture, he linked his Russian experience to his current interests. “There was a certain kind of corruption that I got to see up close in the ’90s,” he said, “and I think that a version of it is being repeated here in the United States.”

If approved by the Vermont House of Representatives, who initially passed the bill before it made its way to the Senate, the law would take effect on July 1, 2016.

Vermont is on track to become the first state to label genetically modified foods. On Tuesday, the Vermont Senate approved the GMO labeling bill, H.112, which will require mandatory labeling of all food products made from genetically modified crops without the dependency of other states.

Unlike Maine and Connecticut’s GMO labeling bills, which were passed last year and will only go into effect when other states pass similar laws, Vermont’s H.112 carries no such provisions. The bill doesn’t require other states to enact GMO labeling laws in order to share legal fees if the GMO labeling laws were challenged in court. Instead, Vermont’s Judiciary Committee chairman, Richard Sears, D-VT, said that he felt the state was in “good legal shape” and that the bill is “defensible” so “relying on other states was not in [their] best interest.” Sears also stated that the committee would rather "other states follow the course of Vermont."

If approved by the Vermont House of Representatives, who initially passed the bill before it made its way to the Senate, the law would take effect on July 1, 2016.

After a two-hour discussion among senators, the bill passed with a favorable 28-2 vote, according to the coalition, Vermont Right to Know GMOs. Backers of the bill said they weren’t questioning the “indictment of the science of genetic engineering,” rather they were supporting consumers’ right to know what was in their food.

“The question that this bill addresses is not the safety, or danger of genetically modified organisms, in any case,” Democratic Sen. Richard McCormack said. "The question the bill addresses is the right to know.”

While the majority of Vermont’s Senate supported the bill, only two senators opposed it.

Republican Sen. Norm McAllister, who used many GMO products through the years as a former dairy farmer, said that the public has been misinformed and mislead regarding the “possible health concerns” from genetically engineered organisms.

“This is the misinformation that the public has had,” McAllster said. “Even in our public hearing we heard from people who were making statements that we even knew were incorrect. It was a scare tactic as far as I’m concerned and that is why I don’t support it.”

The preliminary approval of Vermont’s H.112 has many supporters and activists excited to “set the course for Vermont to become the first state in the nation to label genetically modified foods,” according to Vermont Right to Know GMOs. And the Senate majority feels confident that Vermont’s House will approve the bill in the coming weeks since it is very similar to the bill the House initially passed last year.

'The longer we wait, the costlier it will be': IPCC's latest climate assessment makes it perfectly clear that solutions to crisis exist, but political atrophy spells doom

- Jon Queally, staff writer

Costs of action are tiny when compared to the costs of "business as usual," says IPCC. (File)The latest report by the Intergovernmental Panel on Climate Change (IPCC), released Sunday in Berlin, shows that humanity still has time to solve the global crisis of global warming and climate change, but only if governments and industry are finally forced to make the political and financial decisions that will see the rapid reduction of CO2 emissions while launching a planetary push for renewable energy sources.

Environmentalists responded to the report by saying that its findings simply go to show that far from showing a 'green energy revolution' is expensive or prohibitive, the opposite is true.

"Dirty energy industries are sure to put up a fight but it's only a question of time before public pressure and economics dictate that they either change or go out of business. The 21st century will be the 'age of renewables'." —Kaisa Kosone, Greenpeace

"Clean energy is not costly, but inaction is," said Greenpeace campaigners Daniel Mittler and Kaisa Kosonen from Berlin. "Costly in terms of lives, livelihoods and economies if governments and business continue to allow climate change impacts to escalate."

According to the Working Group III contribution to the IPCC’s Fifth Assessment Report, it remains possible, "using a wide array of technological measures and changes in behaviour," to limit the increase in global mean temperature to two degrees Celsius above pre-industrial levels as world governments have agreed is the target for this century. However, says the report, only "major institutional and technological changes" will do and they must be done immediately without the delays and obstructions that have so far blocked meaningful action.

The key message of the report is that the burning of fossil fuels must be rapidly curbed and phased out, while the investments in renewable, low- or zero-carbon sources of energy must be scaled up dramatically. And, as Mittler and Kosonen summarize, the economic, ecological, and societal realities prove that "climate action is an opportunity, not a burden."

“The longer we wait, the costlier it will be,” said Charles Kolstad, an environmental economist at the University of California, Santa Barbara, and the report's lead author.

“Climate policies in line with the two degrees Celsius goal need to aim for substantial emission reductions,” said Ottmar Edenhofer, one of the co-chairs of the report. “There is a clear message from science: To avoid dangerous interference with the climate system, we need to move away from business as usual.”

"The solutions to make the shift from fossil fuels to renewables are clear," says Hoda Baraka, global communications manager for the climate action group 350.org. "We need to stop pumping money into a rogue industry that is determined to maximize its profits at any cost. Divestment is the means to shift investments away from coal, oil and gas companies and into a more equitable and sustainable energy economy."

As Greenpeace's Kosonen said in a statement: "Renewable energy is unstoppable. It's becoming bigger, better and cheaper every day. Dirty energy industries are sure to put up a fight but it's only a question of time before public pressure and economics dictate that they either change or go out of business. The 21st century will be the 'age of renewables'."

Reporting on the IPCC's findings, the Guardian's Damian Carrington notes that solving the crisis is 'eminently affordable' compared to the disaster of doing nothing. Focusing on the various mitigation options included in the report, he writes:

Along with measures that cut energy waste, renewable energy – such as wind, hydropower and solar – is viewed most favourably by the report as a result of its falling costs and large-scale deployment in recent years.

The report includes nuclear power as a mature low-carbon option, but cautions that it has declined globally since 1993 and faces safety, financial and waste-management concerns. Carbon capture and storage (CCS) – trapping the CO2 from coal or gas burning and then burying it – is also included, but the report notes it is an untested technology on a large scale and may be expensive.

Biofuels, used in cars or power stations, could play a “critical role” in cutting emissions, the IPCC found, but it said the negative effects of some biofuels on food prices and wildlife remained unresolved.

The report found that current emission-cutting pledges by the world’s nations make it more likely than not that the 2C limit will be broken and it warns that delaying action any further will increase the costs.

Friends of the Earth energy program director Ben Schreiber said the IPCC has done its job and now it is time for governments to finally stand up and do theirs.

"Time is running out," said Schreiber, "but we can still alter our current trajectory before it leads to climate disaster. Unfortunately, even as the world’s leading scientists are laying out the need for urgent action, the political leaders at the negotiating table remain unwilling to commit to the steps necessary."

Schreiber pointed the finger at the United States, the largest historic emitter of greenhouse gasses, and said the “all of the above” energy policy of President Obama is incompatible with "the overwhelming evidence that we must leave fossil fuels in the ground." Coal and natural gas, he said, have no place in our climate constrained world and the White House and other leading developed nations must finally face their special responsibility to lead, not obstruct, the path towards a new energy paradigm.

'Even those of you who talk about the 1%, you don't really get what's going on. You're living in the past.'

- Jon Queally, staff writer

(Credit: Moyers & Company)In an interview with journalist Bill Moyers set to air Friday, Nobel laureate and New York Times columnist Paul Krugman celebrates both the insights and warnings of French economist Thomas Piketty whose new ground-breaking book, Capital in the Twenty-First Century, argues that modern capitalism has put the world "on the road not just to a highly unequal society, but to a society of an oligarchy—a society of inherited wealth."

The conclusions that Piketty puts forth in the book, Krugman tells Moyers, are revelatory because they show that even people who are now employing the rhetoric of the "1% versus the 99%" do not fully appreciate the disaster that global wealth inequality is causing.

"We are becoming very much the kind of society we imagine we're nothing like."

Says Krugman:

Actually, a lot of what we know about inequality actually comes from him, because he's been an invisible presence behind a lot. So when you talk about the 1 percent, you're actually to a larger extent reflecting his prior work. But what he's really done now is he said, "Even those of you who talk about the 1 percent, you don't really get what's going on. You're living in the past. You're living in the '80s. You think that Gordon Gekko is the future."

And Gordon Gekko is a bad guy, he's a predator. But he's a self-made predator. And right now, what we're really talking about is we're talking about Gordon Gekko's son or daughter. We're talking about inherited wealth playing an ever-growing role. So he's telling us that we are on the road not just to a highly unequal society, but to a society of an oligarchy. A society of inherited wealth, “patrimonial capitalism.” And he does it with an enormous amount of documentation and it's a revelation. I mean, even for someone like me, it's a revelation.

A key component of this ongoing disaster of capitalism is what happens when great wealth—and Piketty puts focus on inherited wealth—grows at rates faster than the overall economy. The mathematical formulation of that idea—which looks like this: r > g—is now gaining popular currency.

"It's a real 'eureka' book," says Krugman. "You suddenly say, 'Oh, this is not—the world is not the way I saw it.' The world in fact has moved on a long way in the last 25 years and not in a direction you're going to like because we are seeing not only great disparities in income and wealth, but we're seeing them get entrenched. We're seeing them become inequalities that will be transferred across generations. We are becoming very much the kind of society we imagine we're nothing like."

The prediction embedded in Piketty's book is that even as inequality has been on a steady rise for the last several decades, the truth is: we ain't seen nothing yet.

As we go forward, according to Krugman, Piketty's thesis says that even though inequality is already a huge problem, it's going to get even worse. "Unless something gets better," he explains, "we're going to look back nostalgically on the early 21st century when you could still at least have the pretense that the wealthy actually earned their wealth. And, you know, by the year 2030, it'll all be inherited."

Writing about his new book at The Nation on Friday, the Economic Policy Institute's Jeff Faux says that though Piketty "is certainly not the first economist to criticize inherited wealth" his "credentials and exhaustive attention to statistical detail make him harder for the pundits and policy elites that protect the plutocracy to dismiss."

Faux concludes that Piketty has re-discovered, and re-stated for a modern audience, is what Marx himself and others long ago realized—that capitalism "is not only unfair, it is relentlessly and dynamically unfair."

As a point of order, however, it seems noteworthy that Piketty is quite prepared to go even further. In an interview last week in Europe, Piketty didn't stop at saying capitalism was unfair, but stated: "I have proved that under the present circumstances capitalism simply cannot work."

And as Krugman explains to Moyers, the implications of a world dominated by the super-wealthy for regular working people is profound. "When you have a few people who are so wealthy that they can effectively buy the political system, the political system is going to tend to serve their interests," he said.

Watch the interview:

______________________________________________

This work is licensed under a Creative Commons Attribution-Share Alike 3.0 License.

When Lindsey Morris Carpenter was a college student studying art in Philadelphia, she never expected that, just a decade later, she would spend most of her days fixing up tractors, turning piles of manure, and corralling chickens.

Carpenter doesn’t want to be the Whole Foods of farm-to-table produce.

But that’s precisely what she’s doing. Carpenter, 29, dropped out of school in 2004 and returned to her home state of Wisconsin, where she found a job on a vegetable farm. She went on to apprentice at a larger operation in suburban Chicago and eventually secured employment at an urban farm on the city’s south side, teaching previously incarcerated people how to grow food.

By 2007, Carpenter had decided she wanted her own piece of land to farm, so she and her mother, Gail, bought 40 acres in south central Wisconsin and got down to business—an opportunity she's grateful for since she's aware that not everyone has access to the resources that allowed her to purchase this land.

Today, Carpenter’s certified-organic operation, Grassroots Farm, grows fruit, vegetables, hops, and herbs; she also sells pesticide-free cut flowers and eggs from the farm’s chickens. Being as environmentally sustainable as possible is paramount to Grassroots’ operations, Carpenter says. So, too, is a commitment to provide healthy, fresh food to local people regardless of the size of their bank accounts.

“One of my biggest priorities is affordability,” Carpenter said. She doesn’t want to be the Whole Foods of farm-to-table produce. To that end, she designed her community supported agriculture program to be relatively affordable. She charges only $25 a week for a box of produce, which she offers 16 weeks out of the year.

Carpenter’s been in business for five years and has struggled to make a living; she estimates her take-home income at $1.75 an hour. And while it’s been “shockingly easy” to get support from her neighbors, they’re also “sketched out” by her tattoos, short hair, and unmarried status.

Carpenter is one of America’s new and growing class of women farmers. Her focus on sustainability and social justice represent part of the promise women bring to the sector, while the difficulties she faces demonstrate some of the challenges that stand in their way. Many of those challenges are shared by Carpenter’s male counterparts: inclement weather, insects, weeds, erratic markets, soil erosion, droughts, labor shortages, urbanization, and the expense of sustainable methods that don’t rely on toxic chemicals or machines dependent on fossil fuels. But additional burdens often fall on women farmers, such as childrearing or caring for aging parents.

Luckily, women farmers from earlier generations have built institutions designed to help newcomers. And Denise O’Brien, a farmer from southwest Iowa, has done more than her share.

As times got rough, in many cases it was the farmers' wives who kept the operations going.

O’Brien and her husband, Larry Harris, decided they would grow organically when they first started farming in 1976. They were inspired by the first Earth Day in 1970, she says, and the many environmental issues making headlines in the mid-1970s. She talks about organic agriculture in classic environmental terms of doing no harm and leaving the earth in better shape than how you found it.

But the decision to go organic left the couple feeling isolated from local farmers, who mostly grew corn, soybeans, and hay on conventional farms. No networks existed to provide support to farmers who wanted to do things differently.

“When we started farming, we couldn’t even say the ‘O-word’ out loud,”O’Brien said, laughing. “But we’re out now.”

By the mid-1980s, O’Brien and Harris had started an informal network called the Progressive Prairie Alliance. Ten years later, she’d helped to build several organizations that helped farmers work more sustainably and cooperatively, but hadn’t yet done anything specifically to help other women farmers. That changed in 1995, when O’Brien, then president of the National Family Farm Coalition, was asked to give a presentation at the United Nations Fourth World Conference on Women in Beijing.

O’Brien went searching for case studies on American women working in agriculture, but couldn’t find many. She had readThe Invisible Farmers: Women in Agricultural Production, a book by Carolyn E. Sachs about women in the industry. She also had her own personal experience to go on—she had lived through the farm crisis of the 1980s when an estimated 200,000 to 300,000 farmers faced financial failure as land and commodity values boomed and busted, interest rates skyrocketed, and thousands went bankrupt.

As some farmers sunk into depression, O’Brien says that in many cases their wives were the ones who kept the operations going. She believed the landscape of industrial agriculture would change as more women farmers became decision makers, and suspected their role would only grow.

What the numbers show

She was right. The number of women who were named as the principal operator of an American farm or ranch increased by nearly 30 percent between 2002 and 2007, according to the U.S. Census of Agriculture. Women composed about 14 percent of principal farm operators in 2007, and that percentage has held steady since then, according to the preliminary 2012 census released in February.

However, that jump may have more to do with what was happening in the census than on the farm. The form used in the 2007 census was the first to allow two primary operators to be listed—so wives now had a place to be named alongside their husbands. The full 2012 census will be released later this spring with data on women as a percentage of all operators, not just the principal ones; in 2007 women made up 30 percent of all farmers.

Part of the picture is that both men and women are leaving the profession, but women are leaving less quickly. The total number of farms in the United States declined by about 5 percent to 2.1 million from 2007 to 2012, with nearly all of those losses concentrated among smaller farms of less than 1,000 acres in size.

And women-operated farms are generally smaller and less profitable than others, according to the new census data. Seventy-five percent of American farms grossed less than $50,000 in 2012; for farms with a female principal operator that figure was 91 percent. About 69 percent of U.S. farms were smaller than 180 acres in size; for farms with a female principal operator that figure was 82 percent.

But it’s not just a picture of women farmers barely scraping by. Census data from 2007 showed that women were more likely than men to operate farms with a diversity of crops, and to own a greater percentage of the land they farmed. Women farmers also tended to sell food directly to the consumer rather than to large food-processing corporations—an approach that the United Nations report has found to be important for improving food systems.

Leigh Adcock, executive director of the Women, Food and Agriculture Network, said she believes the U.S. food system will be healthier when more women farm.

Growing institutions

Last November, more than 400 women from 20 states and four countries assembled in Des Moines, Iowa, for the fourth conference hosted by the Women, Food and Agriculture Network, a nonprofit organization that O'Brien founded in 1997.

"When portions of the population are left out of things then you’re not hearing the whole picture."

WFAN’s mission is to “link and empower women to build food systems and communities that are healthy, just, sustainable, and that promote environmental integrity.” The group encompasses all sorts of women: some who caught the farming bug after careers in other sectors, widows who inherited land, and some who work side-by-side with their partner.

The network has been expanding its ranks to provide much-needed camaraderie for women working in a male-dominated field and education on how to lead the sustainable farming movement. This year’s conference included sessions on marketing, soil health, cooperatives, research and grants, pricing, pesticide drift, and wildlife and watershed management. Sustainability was a common theme.

The network has grown from 300 members in 2008 to more than 4,000 today, which suggests women in sustainable agriculture aren’t going away anytime soon. But whether more women means an improved food system is a question that must be answered with evidence, O’Brien said. For now, she’s just trying to get women farmers a seat at the table.

“I believe in my heart of hearts that when portions of the population are left out of things then you’re not hearing the whole picture,” she said.

California produce in Iowa's farm country?

Being involved with the Women, Food and Agriculture Network has given Iowan farmer Ellen Walsh-Rosmann an outlet for her message that farmers need to make their voices heard on legislation related to food and agriculture. She has hosted politicians at her in-laws’ farm and has lobbied in Washington, D.C.

“We live in Iowa,” she thought. “What’s going on here?”

“[Lobbying trips] made me realize this is not an intimidating system,” she said. “These people are just like us and they come from where we live, they know the same people we know … but we as constituents can really inform them and tell them those stories and update them on the current situation. That’s what our job needs to be.”

Walsh­-Rosmann moved with her husband to the small city of Harlan during the month of September, a good time for local food. But when shopping at the grocery store for the first time, she discovered only produce grown in California and wrapped in plastic.

When she and her husband started Pin Oak Place, a 10-acre farmstead, in 2010, they were adamant they would focus on nourishing their community with fresh, healthy, organically grown vegetables and certified-organic eggs. The time she’d spent at Iowa State University studying the social, political, and economic forces that affect agriculture cemented this mission.

But putting her mission into practice has been a challenge.

“I was doing the local farmers market in my town and I was basically giving food away,” she said, meaning they couldn’t make a profit. The farmers have shifted their business operations to focus on wholesale, targeting nearby Omaha, Neb., and its much larger population.

Between raising her son, dealing with her own health problems, and struggling to build a profitable business based in sustainable farming, life has become a balancing act for Walsh-Rosmann. Her network of other women farmers provides invaluable support.

Sena Christian wrote this article for YES! Magazine, a national, nonprofit media organization that fuses powerful ideas with practical actions. Sena is a newspaper reporter in Roseville, Calif., with a passion for social justice and indoor soccer.

April 17, 2014

The slower rate of rise in global surface mean temperature since 1998 has been the last straw for Britain’s respected, eccentric, environmental scientist, James Lovelock. He now has made a complete reversal from being a ‘radical alarmist’ on climate change to being a ‘radical non-alarmist’. In 2008, Lovelock said climate warming had already become irreversible, “Catastrophe is unstoppable and everything we are trying to do about it is wrong.We won’t invent the necessary technologies in time and ‘80%’ of the world’s population would be wiped out by 2100. People have been foretelling Armageddon since time began, but this is the real thing. Enjoy life while you can because if you are lucky it’s going to be 20 years before it hits the fan.”

“We've got it all wrong with climate models, planet earth has not been warming the last 15 years as fast as it was – meaning we won’t be warming as much and as fast as previously expected. Climate alarmism is unwarranted. Warming will happen, just not as catastrophically as I once imagined. We need to stay skeptical about climate models. In the past, I tended to exaggerate the immediacy of global warming. I was led astray by ice cores that seemed to imply changes in CO2 were the dominant changes. It is a mistake to take the Intergovernmental Panel on Climate Change’s projections as if written in stone. I don’t think anyone really knows what’s happening. They are just guessing.”

This tone echoes Princeton’s Dr. William Happer's disbelief in the near-term threat of global warming and CO2 as causing same – i.e., a climate cataclysm doesn’t exist. In Happer’s words, “The increase of CO2 is not a cause for alarm and will be good for mankind. GHGs make the Earth warmer and hospitable.” For Happer, the correlation, or ‘coincidence’, as skeptics are prone to say, of CO2 and rising global temperatures is not causation. Unlike Happer, Lovelock doesn't dismiss the correlation of CO2 growth and related feedbacks with earth warming over the last century but he thinks the oceans may be playing a bigger role in climate warming. For him, surface warming is going at such an extremely slow rate that we'll not reach a “dangerous” 2 degrees C increase possibly for centuries despite the fact that CO2 emissions have been accelerating the last five decades.

We all know the global rate of surface temperature warming has slowed down the past 15 years. The IPCC has admitted this is not well understood and may add another ten years to the irreversible tipping point expected in 2030 if GHG emissions are not sharply curtailed. But this short-term drop in the rate of warming does not mean we are not on a long-term warming trend that could well exceed a 2 degrees Celsius increase by 2050. The last 15 years of up and down fluctuations (see Graphs below) largely due to natural variability is too short a period to identify a climate trend. Let’s not forget that CO2 can remain in the atmosphere for a century or more which means its increasing concentration due to human activities can have a warming effect on our climate for a long time.

Also, the growth in CO2 concentrations is a far cry from being ‘modest’ as some skeptics falsely claim. In 1850, the concentration was 280 ppm rising only 10% (110 years later) to 310 ppm in 1960, and skyrocketing 30% (53 years later) to 400 ppm in 2013. This definitely is not a modest increase. The atmospheric annual average rate of CO2 increase in the last decade (2.1 ppm/year) was more than TWICE as steep than 50 years ago (at 0.9 ppm/year). In 2013 alone it increased by 2.6 ppm.

The atmospheric average annual rate of C02 increase was 1.2% between 1970-2000 rising to 2.2% between 2000-2010 and now accelerating further to 3% per year between 2010 and 2013 as the economy meekly recovers. If it rises just 1% over the next 40 years, the atmospheric CO2 concentration will easily reach an extremely high 600 ppm by 2050. This means the planet will be absorbing ever more energy from the sun than it radiates to space. Where will the excess heat energy go? Answer – probably the oceans with all the ecological damage that will bring. But then again, the alarm-proof Lovelock is telling us not to panic. His recent solacing remark, “We may muddle through into a strange and viable new world,” is not very solacing.

The CO2 concentration today of 400 ppm does not include the equivalent effect of other GHG emissions, e.g., methane, nitrous oxide, etc. These bring the adjusted 400 ppm to 435 ppm equivalent CO2 concentration in 2013. This also would bring the 600 ppm CO2 concentration forecast for 2050 as stated above to well over the 700 ppm equivalent CO2 range ... leading possibly to a plus 4-5 degrees Celsius warmup of the earth by 2050. Most publications of CO2 emission growth and atmospheric concentrations neglect to include the equivalent CO2 emissions of other GHGs. However, IPCC reports do include the full effect.

The danger of the ongoing warming up of the Arctic is overwhelming given the higher toxicity or earth warming potential of methane! The Arctic melting permafrost has relatively more methane than carbon dioxide. Research confirms there's at least 1 trillion tons of carbon dioxide in the permafrost and another 1.5 trillion tons of housed methane clathrates in Arctic waters.

The 20 year global warming potential (GWP) of methane is 86. GWP is a relative measure of the amount of heat a greenhouse gas traps in the atmosphere. The 86 figure for methane means that over the next 20 years, if a comparable mass of methane and carbon dioxide were injected into the atmosphere, the methane will trap 86 times more heat in the atmosphere than the carbon dioxide. It's the same as saying that 1 metric ton of methane is approximately 86 times as effective at warming as one metric ton of carbon dioxide over a 20 year timescale (dropping to 34 times on a 100 year timescale).

We are living in an interglacial period known as the Holocene. It began about 14,000 years ago with a warm period that suddenly cooled about 10,000 - 8,500 years ago. Over the past 8,500 years, the climate has had 5 intermittent periods of cooling and warming with the coldest period being 1550-1850 AD, called the Little Ice Age. The big lesson of the last 8,500 years is that even seemingly small changes in global average surface temperatures can be quite significant for weather and climate change - especially on regional scales - like we are experiencing today. From 1850 to the present, there’s been a warming trend with C02 atmospheric concentrations averaging in the 180 - 280 ppm range, increasing a little after the industrial revolution and starting to surge after WWII. Prior to 1900, most climate changes are considered natural in that the changes could not have been caused by human activity.

Now we are in a new world with over 7 billion people on earth – an increase of almost 5 billion people since 1950 – injecting 34 billion tons of heat trapping CO2 into the atmosphere per year now amounting to 400 ppm and rising. The last 50 year rapid pace of increase in C02 atmospheric concentrations has been driving ice melt, ocean acidification, rampant fires, droughts, heat waves, reordering of climate and ecological zones. For example, the volume of Arctic ice now is about 9,000 cubic kilometers (after a one-time spike of 3,000 cubic kilometers over the previous 12 months) vs. 20,000 cubic kilometers in the early 1980s or a 55% meltdown.

Lovelock and Happer say that there is no need for panic. After all, the 1998 - 2012 data shows that mean surface temperatures are warming at a minimal rate, far below what’s expected with increasing CO2 emissions. Is Lovelock thus right when he says the 1998 - 2012 trend means the Earth is not warming up, and if it is, very slowly?

The following graphs by NASA and NOAA confirm that, Yes, the Earth is clearly on a long-term warming cycle where temperatures are going UP!

GRAPH 1: Annual Temperature vs.1951-1980 Average (Degrees C)

These data indicate that while temperatures vary with El Nino and La Nina events, there is a clear pattern toward overall warming temperatures. Neutral years like 2013 are in grey.

The CEI history shown in GRAPH 2 is based on 5 climatic indicators. There is also a version which includes a 6th component which is a tropical cyclone indicator which is based on the wind velocity of landfalling tropical cyclones.

The long-term average expected value is 20%. Therefore, CEI values of more than 20% indicate "more extreme" conditions than average. The graph shows that extreme conditions have been increasing since the early 1970s.

While the annual temperature averages are rising, global climate models show greater climate variation as well. The data indicate that extreme high/low temperatures and extreme precipitation are rising in frequency.

Let’s look at the rate of increase in global surface temperatures and what it means. The earth has warmed by more than 0.6 degree C since 1951. Surface temperatures accelerated in the 1980s, peaking at 0.28 degrees C per decade in the 1990s, falling to 0.09 degrees C per decade in the 2000s. Thus, the average rate of surface warming dropped to 0.04 degrees C per decade from 1998 to 2012 versus 0.11 degrees C per decade since 1951. This recent trend going forward means the planet's surface would be less than 1% hotter in 2100 – well under the 2 degrees Celsius the IPCC warns is “extremely likely” by 2050 unless CO2 emissions are sharply reduced. Of course, 1998 was an extremely hot year because of El Nino. So this makes the slowdown in surface temperature appear more striking for the 1998 - 2012 period than it really is.

But the 1998 - 2012 0.04 degree C per decade average rate of warming excludes the Arctic – by far the fastest warming region in the world. Using satellite data to obtain Arctic temperature changes, Kevin Cowtan of the University of York, UK has recently discovered that the average global surface rate of warming was three times higher or 0.12 degrees C per decade during 1998-2012. Using weather stations for Arctic temperature changes, NASA arrived at a global warming rate of 0.07 degrees C per decade for the same period. (see: New Scientist, 7 Dec. 2013)

It makes no difference whether the 0.12 or 0.07 figure is correct as this does not mean warming has suddenly stopped or slowed down indefinitely just as the rapid warming of 0.28 degrees C per decade during the 1990s does not mean that warming had accelerated. Surface temperatures go up and down, as they have in the short 1998 - 2012 period, because of natural variability, e.g., changing currents, winds, volcanic eruptions, aerosols, black dust. The natural and human contributions must be separately identified. The IPCC and other institutions have completed this scientific calculation task very meticulously. This work has revealed that the steadier long-term warming trend has been heavily amplified by human activities. It has been significantly disguised by a stupendous ocean sink where most of the sun’s radiation has been going. More on this ocean phenomena follows.

GRAPH 3: Global Temperatures WITH GHGs

Using 14 different models in IPCC’s 2007 4th Report, scientists performed an experiment to calculate the temperature path over the 1900-2005 period “With” and “Without” CO2 and other human-induced factors. GRAPH 3 shows temperature calculations with both natural forcings and estimated GHG concentrations. The black line is the Actual calculated global temperature record while the heavy red line is the models’ average Calculated global temperature with both CO2, other GHGs and natural forcings.

GRAPH 4 : Global Temperatures WITHOUT GHGs

GRAPH 4 shows temperature calculations only with natural forcings, such as solar activity and volcanic eruptions. The heavy black line is the Actual temperature record. The heavy blue line is the models’ average Calculated global temperature with only natural forcings.

Conclusions: This experiment confirmed that projections of climate models are consistent with the recorded temperature trends over the recent decades only if human impacts are included. In words of IPCC’s 2007 4th Report (also validated in the 5th Report in 2013), “No climate model using natural forcings alone has reproduced the Observed global warming trend in the second half of the 20th century.” The consistency has been less thus far for the 21st century with accelerating CO2 and slower growth in surface warming. In addition to the planet's thermal inertia (i.e., including the ocean's) which creates a lag in the response of the surface temperature to the full warming impact of an increase in GHGs -- the other reasons for this have been explained in this paper. The long-term temperature path is still going UP.

Dr. Lovelock’s and Dr. Happer’s (and other scientist-skeptics) claim the IPCC’s temperature calculations and any conclusions drawn therefrom are grossly inaccurate, distortive “guesses,” manipulated for devious reasons by IPCC scientists and a number of global independent scientific academies. On the basis of such an argumentation, or better said, ‘accusation,’ who would gamble the Earth’s accelerating radiative energy input/output imbalance poses absolutely NO threat of an environmental catastrophe in the relatively near future?

The point that needs stressing is that every day surface temperatures are not expected to perfectly track CO2 as CO2 proliferation isn’t the only element driving climate change. The varying temperatures we feel every day are only a part of the solar energy taken in by the earth. For example, the oceans have over 100 times the thermal storage capacity of the atmosphere to absorb the excess heat caused by human greenhouse activities. Human-caused warming is superimposed on a naturally variable climate system.

Thinking in terms of heat energy rather than surface temperature helps in understanding earth warming. The content of heat energy has been building up in the atmosphere. This is because rising levels of greenhouse gases entering the atmosphere reduce the amount of heat energy escaping into space – creating a radiative imbalance of heat arriving and leaving the planet. The atmosphere stores less than 2 - 3% and the planet’s surface can only absorb heat slowly because it’s a poor heat conductor. All this does not mean the earth has stopped warming! Quite the opposite. The Arctic and oceans in general are heating up which contributes to earth warming.

Some key reasons why the rate of increase in average global surface temperature has been somewhat slower the last 15 years include: (1) the sun is getting dimmer; (2) more heat than usual is escaping from the top of the atmosphere as the result of increased sulphur aerosols (from coal burning particularly in China, volcanic eruptions, and other human activities); (3) more of the planet's heat is going into the ocean, especially the Southern Ocean. Studies show that a huge 94% of the net heat energy coming to the planet since 1971 has gone into the oceans, 4% has been absorbed by land and ice, leaving the surface absorbing only 2% of the heat. The IPCC 5th Report says that from 1971 to 2010 more than 60% of the net energy increase in the climate system is stored in the upper ocean at 0 to 700 meters and about 30% is stored in the ocean below 700 meters. Bad news for lots of reasons, the most important being the potential release of highly toxic Arctic methane hydrates, destruction of phytoplankton generating much of earth’s oxygen, and the severe effect already being felt on coral reefs. This is an area I wholly agree with Lovelock – namely, we need to know much more about the ecological dynamics of the serious warming up of the oceans.

We do know water moves back and forth between the oceans and atmosphere. For example, the El Nino phenomenon occurs when easterly winds spread hot water across the tropical Pacific ocean forcing so much heat into the air that the planet surface temperature rises. This contributed greatly to the very hot year 1998. But this phenomenon happens about once every 15 years, so it’s ripe now to reoccur! The opposite is true of the frequent occurrence of La Ninas where westerly winds spread cold water across the sea surface which the tropical Pacific soaks up resulting in planet surface temperature falling or cooling. A large number of long-lasting La Ninas have been taking place in the last 12 years and also figure in as a natural contributor to a lower rate of global surface warming.

But another complex Southern Ocean development under continuing intense scientific study is that changing westerly winds that are going south also determine how much heat and carbon dioxide go into and out of the southern seas. The Southern Ocean has been absorbing vast amounts of heat. Because Southern surface water temperatures are similar to water temperatures deeper down, this enables winds to push surface waters down or pull up deeper waters. Winds that churn up just the top ocean waters are considered to increase carbon dioxide absorption as these waters are not as saturated with CO2 as the atmosphere is. The deep water soaks up heat, thereby slowing land surface warming. This is another factor that partly explains why the average global surface temperature rate of increase has slowed down the last decade.

BUT, there comes a point when the deep ocean sink becomes overwhelmed. Changing winds are affecting how much heat and CO2 go into and out of the Southern Ocean. The danger is that winds that stir up deeper waters can lead to a reduction of CO2 absorption which would heat up the surface areas where we humans live. The release of CO2-rich deep water to the surface would seriously drive up global surface temperatures. Leading scientists are warning that this process is getting closer to the stage of actually happening. That’s why Lovelock is quite right in warning the climate science community there’s much more to be learned about the influence of oceans on climate change and what can be done – given the extremely high CO2 emissions going into the atmosphere annually (see: Geophysical Research Papers vol. 40, p 1754; New Scientist, 20 July 2013.)

A Great Scientist Suddenly Goes Radical Non-Alarmist On Climate Change

Lovelock is a provocative, inventive independent scientist. His book, “Gaia: A New Look at Life on Earth,” outlines a fascinating hypotheses about how the planet is a living and evolving system favorable to life. The Earth acts like a living self-regulating organism, controlling the planet’s chemical-physical interconnections and temperature to keep Earth habitable for life. The Gaia theory has attracted worldwide attention and stimulated vital research on the Earth’s biogeological system. However, Toby Tyrell, researcher in ocean acidification, marine biogeochemistry and interaction between environment and life at the University of Southhampton, UK, has carefully analyzed the whole Gaia hypothesis. Is it right? Tyrell concludes Lovelock's main arguments fail to accurately explain how the planet works. In brief, he finds Gaia a ‘beautiful but flawed’ concept with little if any scientific basis when applied to global environmental phenomena. (see: The New Scientist, 26 Oct. 2013)

On the other hand, Lovelock’s inventive genius has vastly benefited mother Earth. For example, CFCs had long been the dominant compounds in refrigeration, air conditioning and aerosol sprays even prior to WWII. In the 70s, using Lovelock’s invented electron capture detector and measurements of atmospheric CFCs (chlorofluorcarbons) in the Arctic and Antarctica, two scientists discovered the threat of CFCs to the stratosphere’s ozone layer, an important shield against incoming ultraviolet radiation. Lovelock’s invention helped in detecting the growing hole in the ozone layer, an extremely dangerous development now under control.

Lovelock became convinced of the irreversibility of climate change in 2004. By 2006, he was an adamant climate alarmist fearing technologies wouldn't arrive in time and that billions of humans would die by 2100. He now believes that although climate change is still happening, warming is proceeding gently at a very slow pace in contradiction to the voluminous peer-reviewed research of IPCC scientists and other independent scientific institutions.

He’s now saying there's no need for alarm - that we can ‘enjoy global warming.’ Although we’re in the middle of a 30,000 year Holocene interglacial for the first time with 7 billion people going to over 9 billion shortly and 1 billion vehicles going to over 2-3 billion vehicles by 2050, he strangely believes it may be hundreds of years before the earth warms 2 degrees C or more. He’s migrated to the other extreme of the climate threat urgency spectrum. This 180 degree reversal comes from a 94 year old amiable, loner-scientist for years dispensing predictions from his one-man laboratory who said in 2008, “Enjoy life while you can. Because if you're lucky, it's going to be 20 years before it hits the fan”… “Billions of people will lose their lives by 2100.” Is his new admission, “I made a mistake, no need to worry,” an act of courageous scientific objectivity or is his Gaia theory at work (in his mind) that the Earth is a self-correcting organism in which case he’s projecting the prejudices his vision of the future is based on?

Conclusion

Lovelock seems obsessed that a 15 year slower global surface warming trend is the key to understanding the Earth warming cycle we are in and the role of natural and human activities as determined by observations and modeling. The problem is that surface temperatures do not reflect the ever growing complexity of the changing climate, e.g., the multiple interacting positive and negative feedbacks, C02 exchanges with the oceans, ocean current, wind changes, etc.

Lovelock has always said the world is wasting time on renewables like wind turbines and solar. Wind is ineffective for the scale of energy needed and solar will not be effective for another 10 years – about the same time it takes for making a new nuclear plant operation. In his mind, nuclear is the safest, most effective alternative possibility ... but of course that's the opinion of just one scientist. He thinks Germany’s closing of its nuclear plants is a colossal mistake. I couldn’t disagree more … but that’s only one man’s opinion. His unsupported assertions about renewables would not be accepted by many like Mark Jacobson, Prof. of environmental engineering at Stanford University, who has co-authored a series of reports and scientific papers arguing solar, wind, and hydropower could provide 100% of world energy by 2030.

Working with oil firms and small innovative firms, we need a Massive, Rapid but pragmatic step-by-step transition to clean energy sources. The technical knowhow is there but not the leadership. Meanwhile, the value of oil industry assets that are embedded in ever more costly onshore/offshore exploration is going SOUTH … and alert investors are now starting to realize the returns are also going SOUTH – brought on by environmental pollution and all new production coming from extraction of limited expensive unconventional energy sources such as tar sands, gas hydrofracturing, tight oil and deepwater oil.

Like Happer, Lovelock questions the professionalism and motives of the IPCC. He has had some disrespectful things to say about all who represent the international scientific community through the IPCC process, dozens of national academies of science, the leadership of all nations who have endorsed the IPCC assessment findings, and many others. “They don’t know what’s happening. They just guess.” But the question is, is Lovelock also guessing?

Presumably his new book will present credible evidence supporting his radical non-alarmist reversal. It will be interesting to see if Lovelock is guessing or not guessing, denying or not denying the speed of the melting away of Arctic permafrost and sea ice in a region warming up more than Twice as fast as the rest of the world … setting the stage for huge quantities of methane soaring into the atmosphere in the relatively short time frame of a few decades. This environmental threat is without question a short-term near extinction possibility! Some humans will undoubtedly survive in the Arctic region.

The following statement by Princeton’s Dr. William Happer illustrates how people fail to set the high tone for the discussion they expect of others:

“I want to discuss a contemporary moral epidemic: the notion that increasing atmospheric concentrations of greenhouse gases, notably carbon dioxide, will have disastrous consequences for mankind and for the planet. The “climate crusade’ is one characterized by true believers, opportunists, cynics, money-hungry governments, manipulators of various types – even children’s crusades – all based on contested science and dubious claims.”

“If people with similar views want respect in exchange, they need to be high-minded and give respect as well rather than saying such things.” ... “What all scientists should be doing is pursuing a better understanding of the very complex Earth system on which we live, wherever the investigation may take us. It’s fine to raise new issues, offer tough criticisms if justified, and seek deeper insight – but it is also important to be taking an even-handed look at all information, be willing to adjust one’s views as further scientific findings emerge, and not question motives of those who disagree with you.”

I have read much of about Lovelock's environmental research and theories. He's a quirky genius scientist and experimenter of unquestionable originality. His Gaia theory is fascinating and also scientifically controversial when applied to global environmental phenomena. He works in sober simple conditions ...is a truly independent scientific loner-tinkerer and thinker. His sudden switch from being an alarmist activist to being a radical non-alarmist about global warming is both perplexing and strangely appealing to some.

He and Prof. William Happer of Princeton, among others, are now among the most outspoken opponents of the so-called climate 'panic,' alarmist reactions taking place globally regarding climate change. As mentioned though, Prof. Michael MacCracken's 42 page report is an impressive, pithy detailed scientific rebuke of Dr. Happer's theories. Much of his critique of Happer’s ideas appear on first glance to apply to Lovelock’s new-born skepticism.

Will return again to this interesting man, James Lovelock, after reviewing his new book carefully once it’s available here.

It's great to have credible scientists like Lovelock questioning status-quo scientific thinking on climate change. I just find ridiculous his criticism and dismissal of IPCC scientists and scientists from other esteemed professional institutions worldwide as demonstrating a “herd-like” behavior on the near-term urgency of the climate threat … that compromises much of their rational thinking about what’s environmentally taking placing, where it’s going and what can be done about it. He’s obsessed like Happer that now he has the real answers. But is he more honest admitting his mistakes than the hundreds of scientists contributing to the IPCC reports as well as other scientific academies? I doubt it.

2. “We don’t have the money!” An all too familiar refrain. Options have been limited to: • Cut spending • Raise taxes • Sell off public assets This argument is getting old!

3. Federal Option is off the table. Wall Street Journal, January 8, 2011: “We have no expectation or intention to get involved in state and local finance,” Mr. Bernanke said in testimony before the Senate Budget Committee. The states, he said later, “should not expect loans from the Fed.“ In January 2009, President Obama said the Fed might bail out hard-hit state and municipal governments. But the Fed says they are on their own.

4. Federal Option is off the table NO RESCUE FOR YOU! $191B would Rescue all the states… $16T has gone to the banks - 2012 audit of the Federal Reserve

5. “We don’t have the money!” Solutions have been limited to: • Cutting spending • Raising taxes • Selling off public assets No federal rescue. But now, there’s a new option: • Invest in our own citizens The public can own its own bank!

6. Community banks Dividends (Interest)

7. A typical Systemically Important Financial Institution (SIFI) like JP Morgan has just a 31% Loan to Asset ratio – less than ½ of ND’s community banks. SIFIs don’t make most of their money by making loans!

8. The States with the Most Community Banks Generally have the fewest Foreclosures…and Vice Versa Foreclosure Rates for the U.S. January 2014 U.S.: 1 in every 1058 Worst 5 States: Florida: 1 in every 346 Nevada: 1 in every 533 Maryland: 1 in every 543 Illinois: 1 in every 603 New Jersey: 1 in every 619 Best 5 States: North Dakota: 1 in 106,489 Vermont: 1 in 26,854 Mississippi: 1 in 13,851 Nebraska: 1 in 12,654 Montana: 1 in 10,698

9. Small Banks are Disappearing

10. The Big Banks get Bigger…but do not increase their Percentage of Loans to the Community

11. Small Banks’ Share of Assets Continues to Decline  The largest 25 domestically chartered banks in the country control about two- thirds of all the assets held by domestically chartered banks.  There were 2,118 U.S. banks with less than $100 million of assets at Sept. 30, 2013, down from more than 3,000 at the end of 2008 - FDIC "Fifteen years ago, the assets of the six largest banks in this country totaled 17 percent of GDP…The assets of the six largest banks in the United States today total 63 percent of GDP.” Senator Sherrod Brown on Sunday, April 25th, 2010 in an interview on ABC’s "This Week.”

12. And what do these Big Banks do with the Bulk of their Assets?

13. The biggest banks are now even bigger than ever. Are they still Too Big To Fail…or will they actually Fail next time? The operations of the TBTF banks have been compared to a Casino, but this is unfair…to Casinos! In a Casino, you have consistent rules, and if you go bust, you don’t get bailed out, you get thrown out.

14. New option: Create a state-owned bank North Dakota owns its own bank – and therefore it creates its own credit. As a result, North Dakota’s options are to: • Expand public services • Lower taxes • Increase their bank’s capital, to make even more credit available to the people of North Dakota No need for a federal rescue.

15. The North Dakota experience: • State-owned bank established 1919 • State budget surpluses 2008-2009 • Lowest unemployment in U.S. • Lowest foreclosure rate • The most local banks per capita • No bank failures in over 20 years* • Bank funds economic growth, from Main Street to high tech to oil production * Proper risk analysis should include more than that for the Public Bank itself. North Dakota has had no bank failures in over 20 years, while there were 517 bank failures through the end of Sept, 2013 nationwide since 2000, says the cash-strapped FDIC, which has to pick up the pieces.

17. Rating and Staffing: Learning from the Bank of North Dakota • Standard & Poor's (S&P) maintained Bank of North Dakota's (BND) credit ratings in its latest review of the Bank released July 23, 2013. Its long-term issuer credit rating remained "AA-" and its short-term issuer credit rating to "A-1+” • What about “key man” risk? What is the risk of key executives leaving and what does that portend for the safety of the bank? Maybe this is an over-rated fear. While Jamie Dimon makes millions running JP Morgan Chase, the president of the Bank of North Dakota – a Civil Servant - earns about $300 thousand a year. Which is the safer, better-run bank? JP Morgan recently paid over $20 billion in fines for multiple Civil violations (not criminal…so far). The BND has never been found guilty of securities or bank fraud. What are we paying for?

18. Invest in Our Own Citizens Meanwhile, public pension funds in most states have lost billions of dollars. What if these funds were used to own a state bank? And invested in their own citizens, as North Dakota does?

19. What are Our Assets Right Now? Check the Comprehensive Annual Financial Reports…  $164 billion in NY State Net Assets Restricted for Pensions and other Purposes (March, 2013 CAFR)  $139 Billion in NY City Net Assets Restricted for Benefits Payments (June, 2013 CAFR)  There are 10s of billions in other liquid funds too What if 10% of these liquid funds were reallocated to a Public Bank?* OK, these assets are not quite a Money Tree, but they are money that can be loaned into the community, often with higher expectations of return than investments on Wall Street. Remember: it is not under-funding that hurts pension fund reliability, it is under-performance and volatility. * By comparison, the Bank of North Dakota has only $6.4B in assets.

20. Other Municipalities are Investigating Alternate Investment strategies  22 States* are considering some form of State Banking Legislation – and many municipalities are too. Many of these proposals look to fund a Public Bank with State and city funds. • By law, all taxes from North Dakota and the Chickasaw Indian Nation in Oklahoma, go first to these regions’ Public Banks. • Philadelphia, PA is considering a Public Bank. Existing Public Banks in Green: North Dakota: Bank of North Dakota Oklahoma: Chickasaw-owned Bank2 of Oklahoma City. Is it a better local fiscal solution to reallocate some existing funds into a Public Bank? * http://www.nytimes.com/roomfordebate/2013/10/01/should-states-operate-public-banks/many-states-see-the-potential-of-public- banking - citing the National Conference of State Legislatures (NCSL)

21. Free up Funds • Banks have unlimited low-interest credit lines with the Fed • States and municipal governments have no credit line with the Fed So they must create large “rainy day funds”— public money that sits, earning little interest.

22. Level the Playing Field Federal law and the banking system give banks huge advantages and place states at a financial disadvantage. •Banks borrow at rates as low as 0.2% (overnight Fed funds rate) to 1.27% (6-month CD) •States borrow at much higher rates Our state is paying too much for credit. •Banks face new regulatory & compliance issues with Dodd-Frank. A State Public Bank could help community banks comply.

23. Control Rising Credit Costs • States are now hit with lower credit ratings, making borrowing even more expensive • A year ago, California was rated BBB, barely higher than bankrupt Greece What is OUR state’s credit rating? New York’s rating is AA+ to AA– (2013)

24. Urgent Need: Affordable Credit What about municipal governments? Don’t they borrow by issuing bonds? Yes, at “market rates”— but these rates are being driven up, increasing the cost of money. The issue is not just available credit, but affordable credit.

25. What Can Be Done?

26. Today, state and local governments are: • Investing their capital (pension funds), and • Depositing their tax revenues (our money!) on Wall Street Translation: They are handing over their huge credit generating power to the same big banks that got us into this mess in the first place. They are investing in Wall Street, not Main Street. Does this make sense to you?

27. Banking in the Public Interest Deposits begin the creation of credit in a bank. This credit is an asset of the bank. If a state deposits funds in a Wall Street bank, it is giving away its power to create credit. This credit rightfully belongs to the public, not to private banks. Our state and cities should be managing that credit in a public bank—serving the public interest by investing in our own Main Street.

28. Invest in Main Street Through a Public Bank • Keeps our tax money working within the state, city, or borough • Keeps our credit from leaving the state, city, or borough • Strengthens our community banks • Demonstrates that our elected officials are working for us and not for Wall Street • Helps our communities return to prosperity in a nonpartisan way

29. Recap: Solution Choices • Raise taxes • Cut services • Sell assets • Invest in our own citizens by creating a public bank There are no other choices. Will we continue having our tax payments sent to Wall Street banks?

30. Next Steps Refine and pass a resolution: “Return to prosperity by forming a state-owned bank.” Tell your state representative that keeping tax revenues in our state is vital—an urgent need. Find “natural allies” to speak with one voice for public banking in the public interest.

31. Natural Allies • Community leaders whose budgets are being gutted by the state • Enlightened legislators • Enlightened Media & Reporters • Public employees and unions faced with state and city budget cuts: teachers, firefighters, construction workers, etc. • Community bankers wanting to originate loans • Unemployed and under-employed people • Small business owners burdened by high credit card APRs to pay for inventory • Activist groups like Occupy Alt.banking

32. Research, Approach, Petition (RAP)  R - Join online groups: https://groups.google.com/forum/#!forum/public-banking (219 members) https://groups.google.com/forum/?hl=en#!forum/pbivolunteers (141 members) https://www.facebook.com/groups/publicbanking/ (236 members)  R - Download this slideshow: http://www.slideshare.net/ScottOnTheSpot/return-to-prosperity and http://www.slideshare.net/ScottOnTheSpot/return-to-prosperity-6-slides-per-page  R - Begin a study of benefits of a Public Bank in your community, city, state, compare funding alternatives and current investments (will require experts!).  A - Hold a Press Conference or public event: https://vimeo.com/68244964  A - Cultivate the Press: “What North Dakota’s Public Bank Does for Small Businesses” http://boss.blogs.nytimes.com/2014/03/13/what-north-dokotas-public-bank-does-for-small-businesses/  P - Demand that your Assembly Member, City Council member, State Senator, support Public Banking. 10 co-sponsors already support the Sandy Galef bill, above. Get them to sign the Resolution in favor of the bill in the Files section of this Facebook page: https://www.facebook.com/groups/publicbanking/  P - Sign onto the petition to support a State Public Bank - study bill A01696 - and gather more signatures: http://www.change.org/petitions/support-a-public-state-bank-for-new-york-state A thousand signatures hand-delivered in each district would make a big difference!

April 11, 2014

Corn is the staple of the US agricultural system and food supply. It's in everything we eat unbeknownst to many Americans. Corn feeds steers that become steak and fast food hamburgers. Corn feeds chickens and pigs - even catfish, salmon and tilapia. Milk, cheese and yogurt that once came from cows that grazed on grass now come from Holsteins that spend their time tethered to milking machines while munching on corn. Processed foods contain even more corn than so-called "natural" foods. Take chicken nuggets, for example. Not only the chicken itself but the corn starch that holds it together, the corn flour in the batter, the corn oil in which its fried, the leavenings and lecithin, the mono-, di- and triglycerides, the golden coloring, the citric acid that keeps it fresh - all these ingredients come from corn.

Any soft drink in the supermarket including Coke and Pepsi contains High Fructose Corn Syrup (HFCS) so you can wash down your corn with some more corn. A quarter of the 45,000 items in the average supermarket contain corn. Corn's derivatives are used in all processed foods, derivatives such as corn oil, corn starch, maltodextrin, xanthan gum, ascorbic acid, ethel acetate, acetic acid and vanilla extract. When broken down, derivatives of corn get used as a food filler, texturizer, emulsifier, sweetener, preservative, adhesive and many other applications. Government agricultural policies makes corn so cheap that food manufacturers earmark large budgets for research and development to invent infinite ways to push corn into more products. And corn is not only used as a food. It is used in gasoline production (ethanol), construction materials, adhesives, paper products, disposable diapers, trash bags, batteries and charcoal briquettes as well.

Why is corn so ubiquitous in the American diet? The main reason is that it's super cheap and this is mainly a result of government policy. For hundreds of miles in the midwest corn is the only crop grown. Farm after farm are devoted to this monoculture. America produces 300 million tons of number 2 corn each year. This isn't the kind of corn you eat when you eat corn on the cob. This is the kind that is primarily fed to beef cows, chickens and pigs.

It wasn't always so. Farms used to plant several crops and were home to multiple animals. No longer. Why this change from polyculture to monoculture? Credit Archer Daniels Midland (ADM) and Cargill, the two mega corporations of US agribusiness. US government agricultural policies, lobbied for by these giant agricultural corporations, have resulted in corn being the cheapest agricultural commodity out there. Government subsidies, provided thanks to the taxpayers, push the price of corn way below the level that would have been set by the law of supply and demand.

Way back in the 1930s farmers were paid not to grow corn when supply exceeded demand thereby keeping supply and demand in balance and the price paid for a bushel of corn up. The Agricultural Adjustment Act was a United States federal law of the New Deal era which reduced agricultural production by paying farmers subsidies not to plant on part of their land. Its purpose was to reduce crop surplus and, therefore, effectively raise the value of crops. But during the Nixon administration farm policies were rejiggered to increase production and drive down prices.

The 1973 farm bill began replacing the New Deal policy of supporting prices through loans, government purchases and land idling with a system of direct payments to farmers. Farmers were encouraged to sell as much production as they could at any price, no matter how low, because the government (taxpayers) would make up the difference. Corn production skyrocketed much to the approval of large agribusiness corporations like ADM, Cargill and Monsanto which engineered GMO seeds that could be sprayed with their Roundup herbicide. But lower profit margins forced the smaller farmers into bankruptcy. Farmers were forced to maximize the number of bushels their farms could produce per acre. The only way to do this was to use GMO corn (bought from Monsanto), huge tractors and combines and huge quantities of pesticides (also bought from Monsanto).

It became economically expedient to concentrate animals in large feeding pens where they were fed a diet of corn. Corn is fed to beef cows although they evolved to eat grass. Feeding them corn actually makes them sick, and, in order to prevent this, they are fed a dose of hormones and antibiotics with their daily allotment of corn. Corn subsidies have been largely responsible for this change.

Author Michael Pollan's recent book, The Omnivore's Dilemma, suggests that corn subsidies in particular have led to the success of the feedlots or Concentrated Animal Feeding Operations (CAFOs) that he and journalist Eric Schlosser have blamed for the emergence of e. coli as a major health concern. Subsidized corn is so inexpensive that beef companies find it profitable to build large facilities to feed corn to their cattle. Cows do not normally live in enclosed areas or consume corn, so these CAFOs generate large amounts of waste and require antibiotics and other drugs to keep the animals healthy.

From agribusiness' point of view, a cow is simply a vehicle for converting plant material to protein and the point is to get the cow to maximum weight in the shortest period of time. In other words the game is to minimize the time to slaughter for these animals. The same applies to chickens, turkeys and hogs. This maximizes profits. Corn does a better job of speeding up this process than does grass. Corn can be commodified and stored; grass can't. Cheap corn made beef and in particular fast food hamburgers cheap. Those cheap hamburgers are actually subsidized by American taxpayers with the subsidies paid to farmers.

As a reaction to the inhumane treatment of animals in CAFOs and the unhealthiness of chicken and beef provided by animals brought to maturity in these confining conditions where they literally tromp around in their own excrement day after day, the organic movement has taken hold. Cow excrement which used to be spread on fields by manure spreaders on small family farms and which provided healthy nutrients back to the soil is now so toxic due to the corn fed diet that it can't be used as fertilizer and is placed in lagoons where it languishes much like spent nuclear fuel. In both cases there is nothing that can be done with the toxic sludge except to store it in perpetuity. Only there have been burst dams and the resultant toxic sludge has oozed into streams and rivers.

Organic food has also caught the attention of big food producers whose lobbying has shaped the US organic food laws to their benefit. What is considered organic has been defined as loosely as possible. The result is that instead of what the consumer visualizes as a bucolic family farm with happy chickens scratching for worms has instead become big business with CAFOs similar to nonorganic food production. The only difference is that the chickens must be fed organic chicken feed i.e. there can be no chemical additives, hormones or antibiotics in the feed. In order to qualify as free range, the chickens must have the possibility of going outside on some grass. So the large feeding pens have a little door which the chickens can go out and romp around on a fifteen foot strip of grass but only for a short time before they are slaughtered. Most chickens acclimated to the large enclosed pens don't even bother, but they can be marketed as "free range chickens."

Big Organic food production is hardly the small family farm that most people envision. It turns out that there's organic and then there's ... organic. Large scale operations have invaded the organic industry. They operate much like non-organic food industries. In many cases they are one and the same. Take Horizon milk, for instance. I have been drinking Horizon organic milk for a couple of years. I was sort of amazed to see it pop up at Food 4 Less and even, recently, at Wal-Mart. I should have suspected that this was a really huge operation, but until I started researching this article, I didn't realize how huge. It turns out that Horizon is just another brand of Dean Foods:

Dean Foods is by far the largest U.S. dairy processor. According to Sen. Bernie Sanders (I-Vt.), Dean processes 40 percent of fluid milk consumed in the U.S., which it distributes in a dizzying array of brands. Its dominance extends to organic milk, too — Dean’s Horizon brand is the largest supplier of organic milk.

Like a lot of Big Organic food suppliers, Horizon is pushing the limits of the meaning of "organic." The Cornucopia Institute has a dispute going with Horizon over the illegal practice of bringing conventional heifers onto organic farms. These heifers are then converted to organic although they haven't been raised to organic standards up till then.

Conventional replacement dairy calves, typically bought at auctions, likely receive antibiotics, toxic insecticides and parasiticides as well as conventional feed during their first year of life before being “converted” to organics—all practices strictly prohibited in organic production.

Demonstrably lower levels of stress, superior health and improved vitality of the cows separates authentic organic dairy farms from factory farms masquerading as organic, according to the farm policy research group.

“In the factory farm model, the animals are pushed for such high production that, just like in the conventional confinement model, after as few as 1 to 2 years, they are so sick, or they are not healthy enough to breed, that they are slaughtered,” Kastel clarified. “Organic cows are generally so healthy, and live such long lives, that many of the baby calves born can be sold to other farmers, creating an alternative revenue stream for organic farmers.”

The fact that large scale organic farms use the same CAFOs as do the large scale conventional farms explains a lot why there is as much e. coli found in organic food as there is in non-organic food. In both cases animals are concentrated together and live out their days in their own excrement. Only difference is that "organic" cows and chickens are fed organic feed (supposedly) and no antibiotics or hormones. Because of living conditions, organic CAFOs will result in more sick animals even than conventional CAFOs which at least have the advantage of antibiotics.

Another issue with organic produce is that it is allowed into the country from foreign countries as long as it was produced according to organic standards. Of course there is little or no enforcement mechanism to ensure that organic vegetables and fruits from abroad adhere to the highest standards.

Many might think that the issue of food production has nothing to do with climate change, but they would be wrong. Grassing over the huge number of acres now devoted to corn in order to feed ruminants (cows) would in fact do a lot to offset fossil fuel emissions. If the 16 million acres now used to grow corn in the US were converted to pasture, 14 billion pounds of carbon would be removed from the atmosphere by the grasses and put into the soil as enrichment, the equivalent of taking 4 million cars off the road. Cows, and, therefore, humans, would be so much healthier. As much as one third of the greenhouse gasses that human activity has added to the atmosphere can be attributed to food production and transport. Locally grown would reduce the GHGs produced from transporting food all over the world.

In another article I will spell out the differences in more detail between the Big Organic food producers and the local small family operations of real organic farms which are not only organic according to the letter of the law but in the spirit of true organic farming as well.

April 09, 2014

What this comes down to is false advertising on labels—a practice the FDA seems to allow left and right.

Kroger, the largest supermarket chain in the U.S. (by revenue), realizes that consumers care about what they put on their tables, but the company is misleading the nation about some foods, making unacceptable false claims. One product the company is lying about is called Simple Truth Natural Chicken, claimed to be ‘cage-free’ and ‘raised in humane conditions.’

These claims are extremely confusing and meant only to generate more income for the grocery store chain – not to treat animals or consumers, for that matter, fairly. What this comes down to is false advertising on labels – a practice the FDA seems to allow left and right.

Many consumers will pay extra for products that are better for their health. What’s more, there are many individuals searching for meat-providing which care for animals more equitably, instead of the hideous ways that they are known to be treated on factory farms. Kroger’s label implies that chicken grown for their grocery stores are treated better than birds grown in factory farms, but this simply isn’t the case.

First of all, chickens raised for meat in the US are grown in cages, although hens grown for their eggs, are. So the ‘cage-free’ portion of the label is already misleading. It’s a marketing ploy, at best. When a customer called to ask what ‘raised in a humane environment’ meant, she was simply told that, “they live on the floor of a barn in poultry house.”

According to PETA, that means a huge windowless shed is utilized to cram as many as 40,000 birds for harvesting their meat. Chickens normally grow well in groups of about 90. Otherwise, they become stressed from crowding and relentlessly peck at one another causing injury and death. The conditions of a ‘chicken house’ are anything but humane. Michael Specter, a longtime staff writer for The New Yorker, who also visited a chicken shed once wrote:

“I was almost knocked to the ground by the overpowering smell of feces and ammonia. My eyes burned and so did my lungs, and I could neither see nor breathe …. There must have been 30,000 chickens sitting silently on the floor in front of me. They didn’t move, didn’t cluck. They were almost like statues of chickens, living in nearly total darkness, and they would spend every minute of their six-week lives that way.”

Simple Truth Chicken is produced by a company called Purdue, and they only follow minimal industry standards that basically necessitate inhumane treatment of these animals before they end up on your plate – but Kroger wants you to pay extra. They can end up with painful bone deformities being raised this way, as well as ruptured tendons, cardiovascular problems, and lameness.

They are selectively bred for being a ‘broiler’ or a chicken with lots of meat, and they spend most of their lives in chronic pain. Kroger is selling factory farmed chicken.

As I mentioned earlier, there is currently a lawsuit against Kroger for this misleading label, but a Kroger spokesperson simply states the label is ‘accurate.’ Consumers deserve to know how their chicken is really raised.

You can sign a petition to tell Kroger to stop lying about their Simple Truth chicken here. You can also simply boycott them, until they make amends to their customers and change their ways.

Half a century later, he would be the transformational mayor of a major Southern city, Jackson, Mississippi. But just as his tenure was taking shape, Lumumba died unexpectedly Tuesday at age 66.

The mayor’s death ended an epic journey that challenged conventions, upset the status quo and proved the potential of electoral politics to initiate radical change—even in a conservative Southern state.

As a young man, inspired by the Rev. Martin Luther King Jr.’s struggle to address “infectious discrimination, racism and apartheid,” and shocked into a deeper activism by King’s assassination, Lumumba changed his name from Edwin Taliaferro—taking his new first name from an African tribe that had resisted slavery and his new last name from the Congolese independence leader Patrice Lumumba.

Chokwe Lumumba became a human rights lawyer “defending political prisoners.” His clients would eventually include former Black Panthers and rapper Tupac Shakur. His remarkable list of legal accomplishments included his key role in the 2010 decision of Mississippi Governor Haley Barbour to suspend the sentences of Jamie and Gladys Scott, Mississippi sisters who were released after serving sixteen years of consecutive life sentences for an $11 robbery—a punishment that came to be understood as a glaring example of the extreme over-sentencing of African-Americans.

But Chokwe Lumumba had no intention of becoming a usual mayor when he launched his bid last year for Jackson’s top job. After a campaign in which the city councilman was outspent 4-1 and attacked as a militant, Lumumba defeated an incumbent mayor and a business-backed contender in the Democratic primary and then won more than 85 percent of the vote in the June 2013 general election.

He took office not merely with the intent of managing Jackson but with the goal of transforming it. “People should take a note of Jackson, because we have suffered some of the worst kinds of abuses in history, but we’re about to make some advances and some strides in the development of human rights and the protection of human rights that I think have not been seen in other parts of the country,” he toldDemocracy Now! just days after his election.

For Lumumba, that meant building unprecedented coalitions that crossed lines of race, class, gender, ideology and politics. “Our revolution is for the better idea it’s not just for the change in colors.” he told the Jackson Free Press.

Lumumba wanted Jackson to create a “solidarity economy,” with an emphasis on developing cooperatives and establishing models for local development and worker ownership.

We have to deal with more cooperative thinking and more involvement of people in the control of businesses, as opposed to just the big money changers, or the big CEOs and the big multinational corporations, the big capitalist corporations which generally control here in Mississippi. They are a reality.

And so it’s not that we’re going to throw them out of Mississippi. I don’t think that’s going to happen, but I do believe that we can develop ways of working to have Blacks and other—indeed, not just Blacks but other poor people, or people who are less endowed with great wealth—to participate in the economy on an equal basis.

Lumumba was building the coalitions, and gaining a striking level of support for his vision, when he died unxpectedly Tuesday from heart failure.

Celebrating that victory, Lumumba declared, “I want to just say that it’s been a resounding victory here, and there’s only one way to go—that’s up. We’re going to do exactly what we said. We said at the very beginning that we were going to take infrastructure and revitalize infrastructure and transition infrastructure into economy.”

The mayor’s enthusiasm extended to his efforts to convince Mississippi’s conservative legislature to support aid to Jackson. He created a sense that just about anything was possible in a city that embraced his activist agenda on human rights and economic justice issues.

“I have known Mayor Lumumba since 1974,” said Congressman Bennie Thompson, D-Mississippi. “One of the reasons I was so public about my support for the mayor, was that I believed once people got to know the real Chokwe Lumumba they would find him to be an extremely bright, caring and humble individual. His election as mayor and very short term in office demonstrated exactly that.”

Lumumba’s death, from heart failure, came as a shock. And a shocking loss for a city that had elected him just months earlier. Crowds gathered at Jackson’s city hall to mourn that loss. “Words cannot do justice to the emotions we all feel right now. Our great captain has fallen. Our hearts are broken,” said Hinds County (Jackson) Democratic Party chair Jacqueline Amos. “The legacy of Chokwe Lumumba must not be buried with the man.”

Amos is so very right.

Cities are the places where radical reformers can still break the political mold and make real change, where the politics of concession and compromise can be replaced with the politics of people power and renewal. Chokwe Lumumba proved that, and the best way to honor his accomplishment is to elect more mayors who are as determined as he was to be transformative leaders.

Town Clerk Sharon Draper, right, and Town Moderator Jon Gailmor preside over 2013’s town meeting in Elmore, Vt.Toby Talbot/AP

Local democracy in Vermont remains untainted by modernity. In small towns all over the state, people gather in meeting halls, school cafeterias, community centers and churches to hold the annual town meetings on the first Tuesday of March. Every registered voter is welcome; outsiders are not. Except for the clothes people wear, the comfort of central heating and occasional cable TV cameras, these meetings look and sound much as they did 150 years ago.

It was in this public-spiritedness that over 20 towns considered a resolution at this year’s meeting on March 4 to direct their legislators to create a state bank for Vermont. The vote does not have legally binding effects. It is only advisory. But it offers a important indicator of public sentiment on legislation being considered. The bills pending before bothhouses of the Vermont state legislature would transfer 10 percent of tax dollars to a publicly held agency, VEDA, the Vermont Economic Development Authority, and would give VEDA a banking license. The proposal would completely transform the way state revenues are used to finance public services.

Right now, the state deposits its revenues in large, private banks such as Toronto-Dominion (TD) Bank and People’s United Bank. Vermont’s smaller, state-chartered banks do not have the capital or collateral to back the state’s $350 million average daily balance. As a result, Vermonters’ money is put to work outside Vermont and in ways they may not support. In TD Bank’s case, money has been invested in the Keystone XL pipeline, a project a lot of Vermonters oppose. At the same time, the state borrows the money used for economic development and infrastructure projects from Wall Street investment banks. If the proposal succeeds, Vermont will join North Dakota as the second state of the union with its own public bank. In 18 other states, including California — where Ellen Brown, president of the Public Banking Institute, is currently a candidate for treasurer — there are proposals for public banks being considered at the state or the city level. Arizona just chartered a commission to study the issue, and Reading, Pa., is in the process of establishing a city public bank.

A small, grass-roots organization I co-founded, Vermonters for a New Economy, sponsored a study by the University of Vermont’s Gund Institute for Ecological Economics and the Political and Economic Research Institute at the University of Massachusetts to determine the economic impact on Vermont of a state bank. The study demonstrated that a public bank that kept Vermont’s tax dollars in the state and used those dollars for economic development and infrastructure would create over 2,500 jobs, more than $190 million in value-added productivity and more than $340 million in gross state product. For a state of 600,000 people with $27 billion in annual GDP, these are substantial economic improvements, amounting to a 1.26 percent boost to growth.

Despite these benefits, the legislature has not yet moved forward with the proposal. Last week the Senate Government Operations Committee voted to send the bill to the Senate Finance committee with a favorable recommendation. Lobbyists for the large banks oppose the idea, and Secretary of Administration Jeb Spaulding, VEDA CEO Jo Bradley and State Treasurer Beth Pearce — all officials who work closely with the banks — have parroted the bankers’ objections, making the opposition of a few seem like a broad consensus at the highest levels of state government.

To counteract the bank lobby in Montpelier, Vermonters for a New Economy brought the question directly to the voters. Activists circulated petitions, held educational workshops and produced and distributed materials. In October during a national event called New Economy Week, towns all over the state hosted kickoff events for the town meeting campaign for a state bank.

The bankers and their lobbyists didn’t like the approach. (One of the lobbyists also happened to be the mayor of Montpelier.) But voters loved the idea. In 17 towns around the state, a vote to endorse the idea of a public bank passed overwhelmingly last week at the town meetings. In Montpelier the article on the ballot in support of public banking passed by a wide margin and got more votes than the mayor did in his bid for re-election. The vote also passed in Albany, Bakersfield, Calais, Craftsbury, East Montpelier, Enosburg, Marshfield, Montgomery, Plainfield, Randolph, Rochester, Ryegate, Tunbridge and Warren. Only Barnet, Fayston, Greensboro and Marlboro opposed it.

Waitsfield saw a long day of intense discussion on a wide variety of issues. “If a Vermont public bank is organic, grass-fed and pesticide-free, then I say we should all support it,” Charlie Hosford, a former longtime Waitsfield Select Board member, argued. Voters ended up supporting a Vermont public bank 2 to 1. People asked a few good questions: Would politicians run the bank? (No.) What could a public bank do that isn’t being done now? (Use Vermont’s tax money to make loans and infrastructure improvements to earn new revenue for the state.) “A public bank for Vermont would create jobs and allow Vermonters to take control over our financial destiny at a time when everyone agrees that Wall Street’s corporate commercial banking model is deeply flawed at best," said Rob Williams, a Waitsfield town resident and citizen advocate for the public banking effort.

The ultimate decision now rests with the statehouse. Whether legislators will take up and approve the resolution is an open question. The banking lobby and its friends in the governor’s mansion have the media and the larger megaphone. Vermonters for a New Economy continues to hope that the legislature takes the common-sense wisdom of Vermonters more seriously than the self-interest of the big out-of-state banks and their supporters. Time will tell, but whatever the result, a new chapter for public banking opened in Vermont last week, and the idea is bound to spread. There is no good reason for the people’s money to be used in ways that don’t benefit the people.

Gwendolyn Hallsmith is co-founder of Vermonters for a New Economy and acting executive director of the Public Banking Institute.

The proposal would give Vermont Economic Development Authority a banking license and allocate it 10% of taxes collected by the state, rather than the current scenario where large banks outside of the state hold (and use) Vermont’s money. With Vermont in control of its own finances, the state could use the money to fund projects that benefit the state and local economies, including granting loans to Vermonters.

More than 20 Vermont towns met this month to weigh the merits of public banking and the response was extremely favorable. By a margin of about 2:1, Vermonters advocated for public banking.

Unfortunately, as usual with politics, it’s never that easy. Each town’s votes only serve as an endorsement to their elected officials for what they would like to see happen. If state politicians were indeed committed to representing their constituents interests, then the legislation would pass with flying colors. Instead, private interest is lobbying hard to block the idea, so their corporate money and clout could prove more influential to legislators.

In fact, that’s why supporters of public banking turned to the town meetings in the first place. The idea was to show that when Wall Street’s money and connected politicians were removed from the debate, most Vermonters do want public banking. At least now, politicians with ties to the banking industry cannot pretend not to know the will of the people.

Preliminary calculations conducted by Vermonters for a New Economy indicate that public banking would be a boon for the state. The group estimates that the program would create more than 2,500 jobs and generate about $350 million annually. Considering that Vermont is a state with only 600,000 citizens, that’s a 1.26% boost in overall growth.

Vermont citizens also liked the idea of severing ties with Wall Street banks. For example, many Vermonters are disappointed to learn that their money is held by banks that are currently lobbying for the Keystone Pipeline, a project understandably opposed by residents in one of the nation’s greenest states. Additionally, though the bank would turn big profits, that wouldn’t be the sole motivation. For that reason, the state bank would not make risky, economy-crashing investments like the big-name corporate banks.

“A public bank for Vermont would create jobs and allow Vermonters to take control over our financial destiny at a time when everyone agrees that Wall Street’s corporate commercial banking model is deeply flawed at best,” said Rob Williams, a Vermont resident who supports the proposal.

Those afraid of whether public banking will actually work need look no further than North Dakota. The Peace Garden State is a pioneer in public banking, first establishing the institution 99 years ago. The Bank of North Dakota exists to help the state fund large projects, as well as offer inexpensive loans to students, businesses and farmers. Between 2000-2009, the bank pushed $300 million in earnings back to the state’s treasury. The financial stability and cushion that public banking affords the state has been credited with making North Dakota one of the states to best weather the recession in the past five years.

Five years ago, Brian Brasch, president of Branick Industries, a maker of specialty automotive tools in Fargo, N.D., took a phone call from a stranger. The caller was an auto mechanic in Florida who had an idea for a new kind of drain plug for an oil pan, one with an O-ring that expands to stop oil leaks.

Mr. Brasch saw an opportunity. “There’s almost a billion oil changes a year in North America — so O.K., it’s a pretty big market, it’s a green product, everybody wins,” he said. The mechanic’s idea ultimately became Branick’s SMART-O drain plug, and the company now ships about 15,000 plugs a day that sell for about $6 each.

But before it could market the plugs, the company needed almost $2 million to import them from China, where, Mr. Brasch said, the manufacturer normally requires 50 percent down before it begins making the product. And, he said, given the time it takes for the manufacturer to ship two or three months’ worth of the product, and the time it takes for the first customers to pay for it, “that’s eight months of float.”

Mr. Brasch visited his local bank, Alerus Financial, based in Grand Forks, and came away with a financing package that would be unusual anywhere but North Dakota, which operates the country’s only public bank. The state-owned Bank of North Dakota helped finance the loan — and also used state money to buy down the interest rate, from 5.25 percent to 1 percent.

North Dakota uses the bank to funnel deposits from state agencies back into the state’s economy through a variety of loan and other development programs. Mostly it makes loans, teaming with local private banks that initiate the transactions with borrowers. The state-owned bank typically takes half of a business loan, and the interest rate on the state-lent portion is normally one or two percentage points below the market rate.

In January, the Bank of North Dakota played a bit part in an ideological skirmish in the blogosphere after a young activist, Jesse A. Myerson, suggested putting a public bank in every state as one of “Five Economic Reforms Millennials Should Be Fighting For.” The piece led to some interesting discussions, including this response that Mr. Myerson’s suggestions were actually conservative reforms — and that the state-owned bank was responsible for there being more small-business loans in North Dakota than in neighboring states. But just how tight is the link between the Bank of North Dakota and small-business lending? And would other states benefit from having public banks?

Branick’s interest-rate reduction, which will save the company $111,000 over 55 months, was part of a program to aid businesses that provide a broadly defined essential service to a community. The service could be a laundromat or a grocery store or a manufacturer — whatever the community thinks is indispensable and in short supply. And the community must contribute to the buy-down as well, typically through a local economic development organization.

Funded by the legislature, the state’s contribution is three to five times the community’s contribution. Together, they can reduce the borrower’s interest rate by as much as five percentage points, to a rate as low as 1 percent. “In the beginning of the loan, it cuts the borrower’s payment down by about 40 percent,” said Bruce Schreiner, chief executive of Garrison State Bank and Trust, one of two banks in the town of Garrison. Mr. Schreiner said his bank typically does about three of these loans a year, often for new businesses.

Yet the program does not encourage the bank to extend credit to businesses that might not otherwise qualify for it, the way a loan guarantee from the federal Small Business Administration does. “When we run our proposals, we run them at the full payment, because eventually they have to make the full payment,” Mr. Schreiner said. “If they can’t make the full payment at the beginning, our assumption is that when they come off the interest buy-down, they’re not going to be able to make the payment, and then you’ve got loan problems.”

The state will spend $26 million on the program between 2013 and 2015. In 2012, the state bank arranged 84 loans with interest rate buy-downs.

But such buy-downs are a relatively small part of the bank’s commercial lending program. As of last June, private banks in North Dakota had outstanding commercial loans totaling about $3.2 billion, an estimate derived from the F.D.I.C. lending and deposit data, while the Bank of North Dakota had an outstanding portfolio of $525 million. In other words, the state-owned bank’s share of total business lending in the state is about 14 percent.

Its loans appear to generally be toward the higher end of what would be considered “small.” In 2012, the state bank’s average loan, not counting the portion from the private-sector bank, was $1.8 million, more than six times larger than the typical business loan backed by the S.B.A. in the state. In fact, only about 20 percent of the state bank’s total commercial loan portfolio is made up of loans under $1 million, which is how the F.D.I.C. defines a small-business loan.

If the Bank of North Dakota is heavily weighted toward larger loans, said its president and chief executive, Eric Hardmeyer, that’s because those are the loans that the state’s private banks need help with. “We’re a bank that doesn’t originate loans, we participate in loans, so in some respects we are reflective of the needs of the banking community,” Mr. Hardmeyer said.

All banks have limits on how much they can lend, both in any one loan and to any one borrower, based on how much capital they have. In essence, smaller banks are limited to making smaller loans. For example, at Starion Financial, a Bismarck-based bank with 14 branches, including 12 in North Dakota, “we have an in-house lending limit that generally speaking will be about $5 million per relationship,” said Jay Feil, a bank director and president of the bank’s branch in Mandan, N.D. “We can now go out there and do a $10 million loan and keep $5 million and participate out $5 million to the Bank of North Dakota.” With about $1 billion in assets, Starion is the sixth-largest private bank in North Dakota.

Smaller banks “depend even more on the Bank of North Dakota to loan in their community and serve their clients,” Mr. Feil said. “A $100 million bank only has a lending limit of $250,000. How in the world are they ever going to serve the average ag producer in their community?,” he said, referring to agricultural producers.

By allowing smaller banks to make so-called overline loans, “It keeps them competitive with the Wells Fargos and U.S. Banks of the world,” said Russ Erickson, president and chief executive of the Fargo operations of Bremer Bank, a regional lender based in St. Paul with 22 branches in North Dakota. “Without the Bank of North Dakota, the economy wouldn’t be as vibrant as it is today.”

Several bankers said they saw no need to rely on the public bank for smaller loans. “We usually keep those loans 100 percent on our books,” said Randy Newman, chief executive of Alerus Financial. “They’re well within loan limits.”

But to the extent that the Bank of North Dakota keeps the state’s small banks viable, it is indirectly helping the smallest businesses, said Rebel Cole, a finance and real estate professor at DePaul University’s Driehaus College of Business. “Small banks are instrumental to funding small businesses in local areas. Because of their ability to monitor — because they can walk in five minutes to the site of any of their loans — they’re willing to make loans that Bank of America or Wells Fargo, or even larger regional banks, are unwilling to make.”

Indeed, among banks based in North Dakota, which are by definition community banks, loans under $1 million constitute more than 60 percent of all commercial loans, according to F.D.I.C. lending data. The corresponding figure for the three big out-of-state banks operating in North Dakota — Wells Fargo, U.S. Bank, and Bank of the West — is about 15 percent, based again on our estimate, which assumes that in-state lending tracks in-state deposits.

The Bank of North Dakota takes deposits largely from the state and some local governments. Though it accepts deposits from others, it tries to discourage these, so as not to compete with the private sector, by not offering amenities most people expect, like A.T.M.s, debit cards, or online bill payments. In the last year, because of the oil boom, deposits increased 17 percent to $5.7 billion, according to the bank’s latest quarterly report. That is equal to a quarter of the total deposits held by all private banks in the state.

Mr. Cole said that absent the public bank, the state’s deposits might not even remain in the state. “These would largely be uninsured deposits, and it would be imprudent for the treasurer to put them in small banks that might go belly up and impose losses on the treasury,” Mr. Cole said. “So they might go to a too-big-to-fail bank like Bank of America or J.P. Morgan. Or they might just do what brokered deposits do and chase the highest yield.” And if those funds are not deposited in the state, he said, they are not likely to be loaned out in the state.

Mr. Cole said that to judge from the state bank’s published financials, the institution is exceptionally well-managed, especially considering the bank’s political connections. (The governor sits on the bank’s board, and he appoints the other two members.) “Their nonperforming loans never got over 3 percent, which is pretty amazing,” Mr. Cole said. But Mr. Cole saw a red flag in the rapidly growing deposits. “Typically banks that grow really fast make marginal loans that are more likely to go into default.”

Still, Mr. Cole saw promise in North Dakota for states contemplating their own public bank — public banking advocates point most hopefully to efforts in Vermont. Last week, 15 Vermont towns passed resolutions urging the state legislature to establish a public bank. “It could be very beneficial to the small community banks and the state. Even big cities could do this,” he said.

But, he asked, “could other political entities do this as successfully as North Dakota has? They keep their hands out of the cookie jar, but other politicians don’t.”

How government policies worsen the nation’s income and wealth disparities comes into sharp focus in a new government report on capital gains. The short story: Investing is gaining and work declining as sources of income.

Capital gains come from selling assets such as stocks, real estate and businesses. Property owned for more than a year is taxed at lower rates than wages and in some cases is tax-free.

Although capital gains are growing — an indication that national wealth is growing — far fewer capital gains are going to the vast majority, while those at the absolute top of the economy are enjoying vastly more. This trend, as well as other official data, suggests that wealth is piling up at the top and that a narrowing number of Americans are wealth holders.

Larger pie, smaller slice

These findings emerge from a new report by the Statistics of Income branch of the IRS that examined a large set of taxpayers over nine years. I have reanalyzed the data, adjusted for inflation, and then compared similar, but not identical, data for 2012, the year with the latest available numbers.

To understand recent changes in capital gains, think of a pie made from the money received when stocks and other assets are sold for a profit. Call it a capital gains pie.

Now imagine we set down the 1999 and 2007 capital gains pies side by side to see how they were sliced up and handed out to four Americans sitting at the dinner table, who represent four different income classes.

The good news is that the 2007 pie is 40 percent larger than the 1999 pie. But it’s also important to consider the size of the various slices.

The smallest slice from both pies goes to the vast majority of Americans, roughly the bottom 90 percent, whose total income in both years was less than $100,000. In 1999 they got 13.9 percent of the pie, but in 2007 just 5.3 percent. That was such a dramatic decrease that even though the pie was much larger in 2007, that year’s pie slice contained only slightly more than half the dollars of the 1999 slice, $91 million reduced to $49 million. In other words, the bottom 90 percent took a huge capital gains hit, despite the overall increase in wealth.

Next are the slices going to the roughly one in eight Americans making between $100,000 and $1 million. Their slice shrank from 35.5 percent to 28.6 percent, but the dollars received grew by 13 percent, because the pie got bigger.

Next come the small number of Americans, roughly one in 400, who made between $1 million and $10 million in both years. Their slice of pie also shrank, from just over 28 percent to just under 24 percent. But the total dollars in their slice went up by 17 percent.

And what of the top group, the slightly more than 18,000 households with total income of $10 million or more in both years? Their slice doubled to more than 42 percent of the pie. And because the pie was also bigger, their cash from capital gains in 2007 was 2.6 times greater than in 1999.

We are not getting laws that support the vast majority of Americans because members of Congress must raise money from wealthy donors, who in return for their largesse want policies bent in their favor.

So in 1999 the already very rich made almost $146 billion from capital gains, but eight years later they made more than $388 billion.

Wealth was already highly concentrated in America before the 2008 financial crisis, especially financial wealth — stocks, bonds, the cash value of life insurance policies and cash. The Great Recession was a disaster for those who were forced to sell assets due to unemployment, but a grand opportunity for those with the money to buy stocks and other assets at fire sale prices. Since Barack Obama took office five years ago the stock market has more than doubled, while average incomes have fallen.

The role of policy

So are these trends due simply to the luck of the free market? No, in fact, government polices have played an important role in generating these grossly unequal outcomes.

First, tax cuts: One in 1,000 Americans, roughly those making more than $2 million annually, enjoyed 12.5 percent of the tax cuts championed by President George W. Bush. When that’s combined with previous tax cuts under Presidents Johnson, Reagan and Clinton, the top 400 taxpayers in 2006 enjoyed a 60 percent reduction in their total tax burden compared with 1961, my analysis of a different set of IRS statistics shows.

Second, wages hardly grew during the years 1999 to 2007 — or since. Adjusted for inflation, the average wage reported on tax returns in 2007 was only 1.7 percent more than in 1999. That works out to an average annual pay increase of a nickel an hour, not that anyone would notice such a tiny sum — less than $2 per week.

In the next five years, to 2012, the average wages on tax returns remained essentially flat, up $55 compared with 2007. That’s the equivalent of getting a raise each year of about half a penny per hour — less than 20 cents per week.

When wages do not grow but the cost of living rises, people have a reduced capacity to save and invest. Those among the less well off who had saved only to join the ranks of the long-term unemployed have had to sell some or all of their investments to those who are better off.

Among the vast majority a dwindling share of people report any capital gains. In 1999 it was more than 9 percent of taxpayers, but in 2012 it was under 5 percent.

The decimation of unions, enabled by government policies that make organizing extremely difficult, is a major factor in stagnant wages. Moving factory work offshore has added to the downward pressure on wages. Now some white-collar workers are feeling the effects, since almost any job done at a computer can be moved to a low-wage country such as India.

Third, the massive growth of subsidies to business tends to increase the value of companies that get such deals; to enable profit taking, dividends and oversized compensation; to weaken competitors not afforded these gifts (perhaps because of lack of lobbying power and campaign contributions); and to burden taxpayers generally. Many of these subsidies come from state and local governments, virtually all of which inordinately burden those down the income ladder more than the well off, because of regressive levies such as sales taxes.

Holding down wages has increased corporate profits, which have soared to heights never before seen, at least since the government started issuing consistent statistical measures in the late 1920s.

For the bottom 90 percent, roughly the same group making under $100,000 that the IRS studied, total income in 2012 was $31,000 in 2012, down almost $5,400 — or about 15 percent — compared with 1999, analysis of tax data by economists Emmanuel Saez and Thomas Piketty shows.

However, incomes soared for the top 1 percent of the top 1 percent — approximately 16,000 households, or a slightly smaller group than the 18,000 high earners in the IRS study. This group averaged almost $31 million in 2012, up $5 million compared with 1999.

In a representative democracy we choose our leaders, who in turn set policy. A major reason we are not getting laws and regulations that support the vast majority of Americans is that members of Congress and candidates for President must raise money from wealthy donors, who in return for their largesse want policies bent in their favor.

The Supreme Court’s ruling yesterday in McCutcheon v. FEC is probably not the last to overturn limits on campaign giving that were adopted after the Watergate scandal revealed the corrupting influence of big money. As big money’s influence grows due to the high court’s decision we can expect those slices of pie to be recut again and again with fatter slices for the political donor class and thinner slices for everyone else.

The winter of 2014 broke records and budgets. NBC News reported that the economy took a $55 billion hit because of the extreme winter weather. There was $5.5 billion in damage to homes, businesses, agriculture and infrastructure. Cities had additional costs for salt for roads and asphalt for potholes. There were more than 30,000 potholes in Toledo, OH alone. The companies that supply salt and asphalt are making a fortune. This winter also saw 79.3 inches of snow falling in Chicago where there were 23 days below zero.

In California drought covers 99.8% of the state. The Sierra Nevada snowpack, which typically holds at least half of all the water that will flow to the state’s farms and cities each year, is at just one-fourth of its normal level.

As for Silicon Valley, the region's largest water provider is putting in place unprecedented cutbacks this spring on cities and farmers. Because of the lack of rain, the Santa Clara Valley Water District recently alerted seven cities and companies that provide water to about 1.5 million people that it will provide only 80 percent of the treated drinking water they have requested through the rest of the year.

The UN says 2013 extreme weather events were due to human-induced climate change. Typhoon Haiyan killed at least 6,100 people and caused $13 billion in damage to the Philippines and Vietnam. UN Secretary-General Michel Jarraud also cited other costly weather disasters such as $22 billion damage from central European flooding in June, $10 billion in damage from Typhoon Fitow in China and Japan, and a $10 billion drought in much of China.

The polar vortex brought unprecedented cold to much of the continental US. 18 States had all-time record cold in March. Rochester, N.Y. dropped to 9 degrees below zero, breaking the city's all-time March low of 7 below zero. In Baltimore, on March 4 the low temperature dipped to 4 degrees, breaking the all-time coldest March low temperature on record – previously 5 degrees on March 4, 1873.

Atlantic City, N.J. broke its record coldest March low temperature, dipping to a shivering 2 degrees. Dulles International Airport, just west of Washington, D.C., reached 1 degree below zero on March 4, tying the all-time March low previously set after the Superstorm on March 15, 1993. In Charlottesville, Va. the low temperature bottomed out at 1 degree above zero, shattering the city's all-time March record low of 7 degrees.

60 scientists in Japan are writing a massive and authoritative report on the impacts of global warming. With representatives from about 100 governments at this week's meeting of the Intergovernmental Panel on Climate Change, they'll wrap up a summary that tells world leaders how bad the problem is.

The report says scientists have already observed many changes from warming, such as an increase in heat waves in North America, Europe, Africa and Asia. Severe floods, such as the one that displaced 90,000 people in Mozambique in 2008, are now more common in Africa and Australia. Europe and North America are getting more intense downpours. Melting ice in the Arctic is not only affecting the polar bear, but already changing the culture and livelihoods of indigenous people in northern Canada.

While the eastern United States shivers through an early spring cold snap, the globe as a whole continues to warm. The World Meteorological Organization announced that they had confirmed that 2013 was the sixth warmest year on record, tied with 2007, in their annual report on the world’s weather and climate.

The Southern Hemisphere saw particular warmth: Australia had its hottest year on record, while Argentina saw its second hottest. Europe also experienced its sixth warmest year on record, despite a cooler-than-normal spring in many places. The heatwaves that washed across the continent in summer offset that coolness.

Despite the frigid temperatures that kept those in the eastern United States shivering all winter, the period from December 2013 to February 2014 was the 8th warmest on record globally, the U.S. National Climatic Data Center reported.

Devastating extreme weather including recent flooding in England, Australia's hottest year on record and the US being hit by a polar vortex have a "silver lining" of boosting climate change to the highest level of politics and reminding politicians that climate change is not a partisan issue, according to the UN's climate chief.

The flooding of thousands of homes in England because of the wettest winter on record has brought climate change to the forefront of political debate in the UK. The prime minister, David Cameron, when challenged by Labour leader, Ed Miliband, on his views on man-made climate change and having climate change sceptics in his cabinet, said last week: "I believe man-made climate change is one of the most serious threats that this country and this world faces."

UN climate chief, Christiana Figueres said: "I hope that we don't need too many more Sandys or Haiyans or fires in Australia or floods in the UK to wake us up.

The last week of March saw the gigantic mudslide in Oso, Washington taking more than 24 lives. You might not think this was due to climate change, but it was. That area had been experiencing 200% more precipitation than normal. That excess rain loosened the soil and the mountain collapsed.

A huge storm in the waning days of March just missed the continetal US but whipped up gale force winds on the offshore islands of Martha's Vineyard and Nantucket.

Finally, the UN released their report on the last day of March warning of the impending disasters caused by global warming. The latest report from the UN Intergovernmental Panel on Climate Change (IPCC) says the effects of warming are being felt everywhere, fuelling potential food shortages, natural disasters and raising the risk of wars. A good assessment can be found in the New York Times here.

Last year there were seven major weather events costing $7 billion and 109 lives according to ABC news.

Stay up to date with the latest headlines via email.

Los Angeles paid at least $204 million in fees to Wall Street in 2013, and probably significantly more, in addition to principle and interest payments, according to the report, "No Small Fees: LA Spends More on Wall Street than Our Streets." The study, issued today by a coalition of unions and community organizations, shows that due to revenue losses from the “Great Recession,” L.A. "all but stopped repairing sidewalks, clearing alleys and installing speed bumps. It stopped inspecting sewers, resulting in twice the number of sewer overflows." L.A. spends at least $51 million more in Wall Street in fees than it allocates for its entire budget for the Bureau of Street Services.

The researchers caution that the $204 million figure likely underestimates the true amount, because under current disclosure rules, deals made with private equity companies and hedge funds do not have to be publically disclosed. Also, because the city does not list all these fees in one centralized report, hundreds of individual documents must be reviewed to uncover the amounts. As one of the report's researchers stated,

"This is the first time an accounting of fees has been exposed for a specific public entity, and we don't think we have captured it all. So if you do this for every public entity, cities, counties, school districts, states, and universities, transportation agencies and other public entities we could be looking at an astounding amount of money for education and community services money sucked out of the system."

Astounding indeed. My back of the envelope estimate, extrapolating the L.A. experience to the economy as a whole, suggests that the fees Wall Street extracts from public entities could total more than $50 billion a year — enough to provide free tuition at every public college and university in the country.

The coalition offers the following pragmatic reforms that could be implemented quickly.

Provide Full Transparency: Each year, Los Angeles, not this grassroots research coalition, should tally up and publish in one report all the fees it pays to financial firms.

Bargain: The city has over $100 billion in cash, liquid assets and debts held with financial companies. That gives Los Angeles enormous leverage to bargain for lower fees. Unless there is illegal collusion among these private financial institutions (which is possible), competition for L.A.'s $100 billion should drive fees down.

Sue Negligent Financial Firms: Los Angeles, like hundreds of other state and local governments, bought interest rate swaps (don't ask) from Wall Street before 2008 to lower its interest rate payments on public debt. But after Wall Street gambled our economy into the ground, interest rates collapsed and these swaps turned into bad bets for cities like Los Angeles, and low and behold, big winners for Wall Street. More amazing still, these same contracts were pegged to the LIBOR interest rate benchmark, which we now know was illegally manipulated by the biggest global banks. So Los Angeles also has grounds to sue financial institutions for peddling predatory swaps in the first place and for manipulating the LIBOR rates. Simple justice demands that Wall Street not be permitted to profit as a result of an economic crash it caused, and as a result of illegal rate rigging.

Wall Street's Catch-22

The report prompts us to ask why cities and states go to Wall Street for financing in the first place. The answer is circular. They need to raise private capital through Wall Street because state and local tax bases are increasingly constrained. Those constraints, however, are the direct result of the financialization of the economy. In effect, Wall Street creates the economic conditions that force cities and states to become their prey. Here are a few of the ways financialization undermines the tax base. (Unless otherwise noted, the data below comes from my research, not the report's.)

1. Stagnating worker wages/de-industrialization puts downward pressure on tax revenues: Worker wages have stagnated for more than a generation (see chart below). That stagnation is the direct result of the deregulation of Wall Street starting in 1980. From that point on, financial firms found ways to extract enormous sums from the private sector through leveraged buy-outs and other devices that placed large debts on tens of thousands of American industries. To pay back all those loans, corporations switched their policies from "invest and retain" to "downsize and distribute." Worker wages, pensions and other benefits were attacked with a vengeance.

2. Wall Street incomes soar, but are sheltered from taxes: We all know that the super-rich have gotten richer as worker incomes have stalled. At the same time, the growing incomes of the super-rich are sheltered through tax loopholes and offshore accounts, arranged of course, through Wall Street. Hence they can avoid most state and local taxes. It is estimated that the U.S. treasury loses more than $150 billion a year in taxes due to incomes sheltered offshore.

3. Tax revenues shift from corporations to individuals: The more corporations are loaded up with debt, the less tax they pay because the interest payments are deductible. The net effect is that corporate taxes go down while individual taxes go up. But since the super-rich can shelter their incomes, the burden falls on the middle class and the poor.

5. Tax war between cities and states give corporations more and more tax breaks: L.A. and virtually every other major city in the country, lavishes developers and corporations with tax breaks in order to lure businesses away from each other. The net effect is that corporations and the wealthy pay less, and the pressure rises to cut state and local budgets. The chart below estimates those tax breaks for 2013, and shows that tax breaks and loopholes amount to nearly twice the pension fund liabilities of these states.

6. The dramatic rise in the prison population crowds out other public expenditures. America has the largest prison population in the world. Since 1980 it has grown by nearly 400 percent. Why? Obviously the absurd war on drugs plays a large role. But prison also serve as the holding pen for surplus workers in the financialized economy. Because of all the downsizing, millions have turned to the underground economy for survival. As financialization continues, we can expect prisons to continue to squeeze state and local budgets.

North Dakota Has a Public Bank. Why Not Los Angeles?

Cities and states are dependent on private predatory banks and financial institutions — but less so in North Dakota which has a public bank. There, state and local government can use the Bank of North Dakota as its trustee, knowing that the bank has no incentive to rip them off by charging exorbitant fees. The bank's top executives receive neither bonuses nor stock options, and earn a small fraction of what Wall Street bankers receive.

Los Angeles is 10 times larger, economically, than North Dakota and could easily develop its own bank, and thereby dramatically reduce the fees extracted by Wall Street. Also, the Bank of North Dakota returns a $60 million a year profit to the state from wholesale services it provides to local banks. A Los Angeles public bank should be able to add over $600 million a year in profits to the city's coffers.

Another logical solution is for the Federal Reserve to directly purchase municipal bonds from cities and states just as it is doing right now with the toxic mortgage securities held by the largest banks. Not only would that save state and local public entities approximately $50 billion a year in Wall Street fees, but also it would dramatically reduce municipal interest rate costs.

Of course, none of this will come easy. But this report lights the way. It should be repeated in city after city, in state after state, so that everyone can see just how Wall Street is impoverishing the richest country on Earth.

It used to be accepted without question that a college degree was necessary to get a good job, and over the course of a lifetime, you would make more money with a college degree than without one. But not so fast. Despite the propaganda put out by colleges who hope to profit off your matriculation, it turns out that the latest thing in hiring practices is to disregard the college degree altogether.

Companies like Xerox are hiring not based on your resume, which includes your degrees and work experience, but on a test they've devised which they claim is a better predictor of job performance. Xerox runs 175 call centers around the world. In all, the centers employ more than 50,000 customer service agents who deal with questions about everything from cellphone bills to health insurance.

Xerox was having a problem hiring the right people for the jobs and reducing turnover. So they hired a company to help them do a better job of finding the right people. This company studied the characteristics of those people already at Xerox who were successful at their jobs and came up with a test whose aim was to find new applicants with exactly those same characteristics.

The company, whose name is Evolv, tested prospective employees based on the data collected from employees already on the job and doing well. With these new techniques, Xerox says it has been able to improve its hiring and significantly reduce turnover at its call centers.

Other companies that parse employee data say that the conventional wisdom about the desirability of college graduates as employees is flat out wrong. Michael Rosenbaum of Pegged Software said the following: "We find zero statistically significant correlation between a college degree or a master's degree and success as a software developer." Really?! This is not what the for profit colleges or even the traditional colleges want you to hear. They profit from loading you up with a huge load of student loan debt. Why would you acquire a prodigious amount of student loan debt only to find out that your degree was practically worthless in the job market?

On the Evolv website they say they are the recognized leader in Big Data workforce optimization. The idea is that they collect a lot of data on what makes for a successful employee, and then assist companies in finding those individuals whose characteristics correlate with that data. This does not mean that they look for people with college degrees. The whole degree process is effectively bypassed and invalidated by means of Big Data.

Here's the skinny on Evolv, chosen by Fast Company as one of the top ten most innovative comapnies in Big Data:

[They mine] employee performance to help stanch turnover and upend HR. Big data is also changing the way companies hire and manage their workforces. Like other HR software, Evolv helps employers better understand employees and job candidates by comparing their skills, work experience, and personalities. But Evolv takes it to a deeper level, crunching more than 500 million data points on gas prices, unemployment rates, and social media usage to help clients like Xerox—who has cut attrition by 20 percent—predict, for example, when an employee is most likely to leave his job. Other insights Evolv’s data scientists have uncovered: People with two social media accounts perform much higher than those with more or less, and in many careers, such as call-center work, employees with criminal backgrounds perform better than those with squeaky-clean records. Evolv’s sales grew a whopping 150% from Q3 2012 to Q3 2013.

Hey, this is great news for criminals who finally will be able to compete for jobs on a level playing field with college graduates! So let's get real. A college diploma is nothing more than a piece of paper. It shows that you were able and willing to be bored to death and sit through 16 years of classes while being a pretty good test taker. It's the Good Housekeeping seal of approval. It commends you as a docile and compliant employee, one who will not make waves, one who will submit to a boring job in order to pay off all those student loans.

Here's an example of the counter-intuitive wisdom that Evolv purports to have discovered: Workers who use Chrome or Firefox—instead of Internet Explorer—stay at their jobs longer, miss 15 percent fewer work days, and deliver higher customer satisfaction. Who would have known? So all you job applicants out there - make sure you are using the correct browser if you want to get hired! Some of this stuff is downright silly. Here's another bon mot: Job performance is higher among employees who use three to four social networks compared to those who are less involved with social networks (sort of contradicts the blurb above on Fast Company).

We are entering an era of hypermeritocracy where everyone applying for a job will be given a rating by Big Data. Finally, Huxley's Brave New World is being realized. You might be rated as an alpha or a beta - if you're talented - or a gamma, delta or epsilon if you're not. Your job rating complemented by your credit score will be determining factors in predicting your success or lack thereof throughout life. As long as you tow the line, you'll be OK. Having fun, yet?

So who needs college? Apparently most billionaires don't. Many of those at the top of Forbes list of the 400 richest Americans are college dropouts including #1 (Bill Gates) and #3 (Larry Ellison). Charles and David Koch, tied for #4, are graduates of MIT. Most of the the Walton family (#s 6, 7, 8 and 9) have college degrees which had nothing to do with their inherited billions. Sheldon Adelson (#11) is a college dropout, but he's calling the shots in the political arena. Robert Reich has this to say about dropout Sheldon:

At this very moment, Casino magnate Sheldon Adelson (worth an estimated $37.9 billion) is busy interviewing potential Republican candidates whom he might fund, in what’s being called the “Sheldon Primary.”

“Certainly the ‘Sheldon Primary’ is an important primary for any Republican running for president,” says Ari Fleischer, former White House press secretary under President George W. Bush. “It goes without saying that anybody running for the Republican nomination would want to have Sheldon at his side.”

Jeff Bezos, founder of Amazon, (#12), graduated from Princeton. Larry Page and Sergey Brin, (#s 13 and 14), founders of Google, are college graduates although they dropped out of Stanford before getting their PhDs. Mark Zuckerberg, (#20), founder of Facebook, is a college dropout. Michael Dell of Dell Computer (#25) is a college dropout. Paul Allen, (#26), cofounder of Microsoft, is a college dropout and current owner of the Seattle Seahawks. Lorene Jobs, widow of Steve Jobs founder of Apple Computer who was a college dropout, is #35. Local billionaire Irwin Jacobs, founder of Qualcomm, has a PhD from MIT and is tied for #342 with seven other guys. He has something in common with the Koch brothers although not their political philosophy.

Most of these guys came from humble backgrounds and achieved success by dint of being extraordinarily talented and obsessively hard working. They are the meritocrats of the new meritocracy. Put another way they are the upper 1% intellectualy who became the upper 1% financially. They are not only meritocrats; they are plutocrats as detailed in Chrystia Freeland's book, Plutocrats. This is what is driving income inequality in the US and the world: the phenomenal success of extremely gifted people helped along with a multiplier effect that capitalism and in particular the stock market via Initial Public Offerings provides.

As Chrystia Freeman states in her book:

Forbes classifies 840 of the 1226 people on its 2012 billionaire ranking as self-made. It's true that few of today's plutocrats were born into the sort of abject poverty that can close off opportunity altogether...but the bulk of their wealth is generally the fruit of hustle, intelligence, and a lot of luck. They are not aristocrats, by and large, but rather economic meritocrats, preoccupied with not only consuming wealth but also with creating it.

The concentration of income and wealth at the top comes about as a result of meritocracy more than anything else. Income and wealth inequality represent the dark side of meritocracy. There is a disconnect between the values that got the plutocrats to where they are (intelligence and hard work) and the results which have been produced (erosion of the middle class due to income and wealth inequality).

Incidentally, Bill Gates does not even have a job, having retired from Microsoft, but still made a substantial sum last year. As of March 2014, Gates is worth $76 billion, according to Forbes' annual list of billionaires. That's $9 billion more than a year ago and $4 billion more than six months ago. Even though he's given $38 billion to his charitable foundation, he still keeps getting richer year after year. There are no such similar gains, however, for 99% of US citizens whose wages have been stagnant for years.

"All About Money", with host, John Sakowicz, returns to KZYX on Friday, April 4, at 9 a.m., Pacific Time, with a special edition show with the Public Banking Institute's new executive director, Gwendolyn Hallsmith. She will discuss Vermont's initiative to make a public banking a reality in Vermont.

Senate Bill 204 would grant the Vermont Economic Development Authority (VEDA) a banking license and would further direct 10 percent of the Treasurer’s bank deposits to VEDA for investment in Vermont.

We hope to be also joined by Vermont State Senator Anthony Pollina who introduced S. 204.

BACKGROUND

Earlier this month, AP reported in "Over a Dozen Towns Support Public Bank Idea" that "The majority of communities asked to support the creation of a public bank in Vermont have approved the measure at town meetings.

"Supporters argue that instead of keeping its money in large global banking institutions, the state could save money, create jobs and eventually generate revenue by creating a state bank.

"The proposal would turn the Vermont Economic Development Authority, a nonprofit agency that makes loans, into a bank. A bill pending in the Legislature would put 10 percent of the state's funds into it."

John Nichols in The Nation reports in "Vermont Votes for Public Banking" that "the votes were overwhelming. Vermont is not the only state where public banking proposals are in play. But the town meeting endorsements are likely to provide a boost for a legislative proposal to provide the VEDA with the powers of a bank."

Robb Mandelbaum, in the New York Times writes that "public banking advocates point most hopefully to efforts in Vermont" to emulate the model of the Bank of North Dakota, which "funnel[s] deposits from state agencies back into the state’s economy through a variety of loan and other development programs."

GWENDOLYN HALLSMITH

Co-founder of Vermonters for a New Economy, and the new executive director of the Public Banking Institute, Hallsmith said today: "It is clear that the bank lobby has a lot more traction in the State House than the cities, towns, and the citizens. It has been our contention that the state-chartered banks stand to gain by the legislation, and that their interests and the interests of the large out-of-state banks diverge on this issue."

According to Vermonters for a New Economy, the bill is encountering fierce opposition, not from ordinary Vermonters, but mostly from lobbyists for big private banks. The group says that when Senate Finance Committee hearings began on March 18, the Finance Committee only invited representatives of big banks to testify concerning the proposal. This led a local paper, the Barre Montpelier Times Argus, to call the bill "politically unpopular" even though a large majority of towns supported it in the town meeting campaign.

A study by Vermonters for a New Economy, the Gund Institute at the University of Vermont, and the Political and Economic Research Institute at the University of Massachusetts states that a public bank would create "over 2,500 jobs" and add hundreds of millions in additional gross state product in the state.

According to the Public Banking Institute, public banks are countercyclical, meaning they are "capable of reducing the negative impact of recessions, because they can make money available for local governments and businesses precisely when private banks decrease lending."

ANTHONY POLLINA.

State Senator in Vermont, Pollina introduced S. 204, the bill that would grant the Vermont Economic Development Authority a banking license and direct 10 percent of the Treasurer’s bank deposits to VEDA for investment in Vermont.

KZYX

KZYX is an NPR affiliate station. Our broadcasts are heard at 88.1, 907. and 91.5 FM in the Counties of Mendocino, Lake, Humboldt, and Sonoma in northern California. We also stream live from the web at www.kzyx.org

“As things stand, the banks are the permanent government of the country, whichever party is in power.”

– Lord Skidelsky, House of Lords, UK Parliament, 31 March 2011)

On March 20, 2014, European Union officials reached an historic agreement to create a single agency to handle failing banks. Media attention has focused on the agreement involving the single resolution mechanism (SRM), a uniform system for closing failed banks. But the real story for taxpayers and depositors is the heightened threat to their pocketbooks of a deal that now authorizes both bailouts and “bail-ins” – the confiscation of depositor funds. The deal involves multiple concessions to different countries and may be illegal under the rules of the EU Parliament; but it is being rushed through to lock taxpayer and depositor liability into place before the dire state of Eurozone banks is exposed.

Under the deal, after 2018 bank shareholders will be first in line for assuming the losses of a failed bank before bondholders and certain large depositors. Insured deposits under £85,000 (€100,000) are exempt and, with specific exemptions, uninsured deposits of individuals and small companies are given preferred status in the bail-in pecking order for taking losses . . . Under the deal all unsecured bondholders must be hit for losses before a bank can be eligible to receive capital injections directly from the ESM, with no retrospective use of the fund before 2018.

Under the new EU banking union, before the taxpayer-financed single resolution fund can be deployed, shareholders and depositors will be “bailed in” for a significant portion of the losses. The bankers thus win both ways: they can tap up the taxpayers’ money and the depositors’ money.

The Unsettled Question of Deposit Insurance

But at least, you may say, it’s only the uninsured deposits that are at risk (those over €100,000—about $137,000). Right?

Not necessarily. According to ABC News, “Thursday’s result is a compromise that differs from the original banking union idea put forward in 2012. The original proposals had a third pillar, Europe-wide deposit insurance. But that idea has stalled.”

European Central Bank President Mario Draghi, speaking before the March 20th meeting in the Belgian capital, hailed the compromise plan as “great progress for a better banking union. Two pillars are now in place” – two but not the third. And two are not enough to protect the public.As observed in The Economist in June 2013, without Europe-wide deposit insurance, the banking union is a failure:

[T]he third pillar, sadly ignored, [is] a joint deposit-guarantee scheme in which the costs of making insured depositors whole are shared among euro-zone members. Annual contributions from banks should cover depositors in normal years, but they cannot credibly protect the system in meltdown (America’s prefunded scheme would cover a mere 1.35% of insured deposits). Any deposit-insurance scheme must have recourse to government backing. . . . [T]he banking union—and thus the euro—will make little sense without it.

All deposits could be at risk in a meltdown. But how likely is that?

Pretty likely, it seems . . . .

What the Eurocrats Don’t Want You to Know

Mario Draghi was vice president of Goldman Sachs Europe before he became president of the ECB. He had a major hand in shaping the banking union. And according to Wolf Richter, writing in October 2013, the goal of Draghi and other Eurocrats is to lock taxpayer and depositor liability in place before the panic button is hit over the extreme vulnerability of Eurozone banks:

European banks, like all banks, have long been hermetically sealed black boxes. . . . The only thing known about the holes in the balance sheets of these black boxes, left behind by assets that have quietly decomposed, is that they’re deep. But no one knows how deep. And no one is allowed to know – not until Eurocrats decide who is going to pay for bailing out these banks.

When the ECB becomes the regulator of the 130 largest ECB banks, says Richter, it intends to subject them to more realistic evaluations than the earlier “stress tests” that were nothing but “banking agitprop.” But these realistic evaluations won’t happen until the banking union is in place. How does Richter know? Draghi himself said so. Draghi said:

“The effectiveness of this exercise will depend on the availability of necessary arrangements for recapitalizing banks … including through the provision of a public backstop. . . . These arrangements must be in place before we conclude our assessment.”

Richter translates that to mean:

The truth shall not be known until after the Eurocrats decided who would have to pay for the bailouts. And the bank examinations won’t be completed until then, because if any of it seeped out – Draghi forbid – the whole house of cards would collapse, with no taxpayers willing to pick up the tab as its magnificent size would finally be out in the open!

Only after the taxpayers – and the depositors – are stuck with the tab will the curtain be lifted and the crippling insolvency of the banks be revealed. Predictably, panic will then set in, credit will freeze, and the banks will collapse, leaving the unsuspecting public to foot the bill.

What Happened to Nationalizing Failed Banks?

Underlying all this frantic wheeling and dealing is the presumption that the “zombie banks” must be kept alive at all costs – alive and in the hands of private bankers, who can then continue to speculate and reap outsized bonuses while the people bear the losses.

But that’s not the only alternative. In the 1990s, the expectation even in the United States was that failed megabanks would be nationalized. That route was pursued quite successfully not only in Sweden and Finland but in the US in the case of Continental Illinois, then the fourth-largest bank in the country and the largest-ever bankruptcy. According to William Engdahl, writing in September 2008:

[I]n almost every case of recent banking crises in which emergency action was needed to save the financial system, the most economical (to taxpayers) method was to have the Government, as in Sweden or Finland in the early 1990’s, nationalize the troubled banks [and] take over their management and assets … In the Swedish case the end cost to taxpayers was estimated to have been almost nil.

Typically, nationalization involves taking on the insolvent bank’s bad debts, getting the bank back on its feet, and returning it to private owners, who are then free to put depositors’ money at risk again. But better would be to keep the nationalized mega-bank as a public utility, serving the needs of the people because it is owned by the people.

[T]he financial sector needs more than just regulation; it needs a large measure of public sector control—that’s right, the n-word: nationalisation. Finance is a public good, far too important to be run entirely for private bankers. At the very least, we need a large public investment bank tasked with modernising and greening our infrastructure . . . . [I]nstead of trashing the Eurozone and going back to a dozen minor currencies fluctuating daily, let’s have a Eurozone Ministry of Finance (Treasury) with the necessary fiscal muscle to deliver European public goods like more jobs, better wages and pensions and a sustainable environment.

A Third Alternative – Turn the Government Money Tap Back On

A giant flaw in the current banking scheme is that private banks, not governments, now create virtually the entire money supply; and they do it by creating interest-bearing debt. The debt inevitably grows faster than the money supply, because the interest is not created along with the principal in the original loan.

For a clever explanation of how all this works in graphic cartoon form, see the short French video “Government Debt Explained,” linked here.

The problem is exacerbated in the Eurozone, because no one has the power to create money ex nihilo as needed to balance the system, not even the central bank itself. This flaw could be remedied either by allowing nations individually to issue money debt-free or, as suggested by George Irvin, by giving a joint Eurozone Treasury that power.

The Bank of England just admitted in its Quarterly Bulletin that banks do not actually lend the money of their depositors. What they lend is bank credit created on their books. In the U.S. today, finance charges on this credit-money amount to between 30 and 40% of the economy, depending on whose numbers you believe. In a monetary system in which money is issued by the government and credit is issued by public banks, this “rentiering” can be avoided. Government money will not come into existence as a debt at interest, and any finance costs incurred by the public banks’ debtors will represent Treasury income that offsets taxation.

New money can be added to the money supply without creating inflation, at least to the extent of the “output gap” – the difference between actual GDP or actual output and potential GDP. In the US, that figure is about $1 trillion annually; and for the EU is roughly €520 billion ($715 billion). A joint Eurozone Treasury could add this sum to the money supply debt-free, creating the euros necessary to create jobs, rebuild infrastructure, protect the environment, and maintain a flourishing economy.

April 05, 2014

World Bank chief admits institution's past mistakes, but has it changed its destructive ways?

- Jon Queally, staff writer

President of the World Bank, Jim Yong Kim, is warning that the combined crises of planetary climate change and rising global inequality in a highly interconnected world will lead to the rise of widespread upheaval as the world's poor rise up and clashes over access to clean water and affordable food result in increased violence and political conflict.

In an interview ahead of a bank summit next week, Kim predicts that battles over food and water will break out in the next five to ten years as a direct result of a warming planet that world leaders have done too little to address, despite warnings from the environmental community and scientists.

As Jim Yong Kim warned of the risks of climate change, the UN said food prices had risen to their highest in almost a year. (Photograph: Kevin Lamarque/Reuters)

"The water issue is critically related to climate change," Kim told the Guardian. "People say that carbon is the currency of climate change. Water is the teeth. Fights over water and food are going to be the most significant direct impacts of climate change in the next five to 10 years. There's just no question about it."

Despite the acknowledgement of the problem, however, and even as he made mea culpa for past errors by the powerful financial institution he now runs (including a global push to privatize drinking water resources and utilities), Kim laid the blame on inaction on the very people who have done the most to alert humanity to the crisis, saying that both climate change activists and informed scientists have not done enough to offer a plan to address global warming in a way he deems "serious."

He said: "They [the climate change community] kept saying, 'What do you mean a plan?' I said a plan that's equal to the challenge. A plan that will convince anyone who asks us that we're really serious about climate change, and that we have a plan that can actually keep us at less than 2C warming. We still don't have one."

Kim also acknowledged the threat of unaddressed inequality, saying that access to the internet (mostly through smartphones) in the developing world has created conditions where everyone on the planet knows how other people live, which means that the "next huge social movement" could erupt anywhere at anytime.

"It's going to erupt to a great extent because of these inequalities," he continued and said heads of state from around the world have called for "a much, much deeper understanding of the political dangers of very high levels of inequality."

The question remains: Do these acknowledgements of the dual crisis of a warming, less equal planet from the leader of the World Bank really translate into a transformation of the institution that is well known as one of the key proponents of the policies and projects that have led us to this point.?

According to a new report the World Resources Institute, the answer remains: No.

The new analysis from WRI says that despite Kim's recent rhetoric and focus on "sustainability" for the bank, the reality "shows that while the World Bank has successfully addressed a number of important economic and social risks in its projects, it is falling short in recognizing climate risks."

Out of 60 recent World Bank projects assessed, according to researchers, "only 25 percent included features that took climate change risks into account. This shortfall could leave communities vulnerable to extreme weather, sea level rise, and other climate impacts—impacts that threaten to undermine the World Bank’s efforts to eliminate poverty."

_____________________________________

This work is licensed under a Creative Commons Attribution-Share Alike 3.0 License.

Hedge fund managers are beginning to snap up water rights along the Colorado River.

A recent Bloomberg View (2/24/14) headline reads, "Profit From Global Warming or Get Left Behind." In his new book, WINDFALL (New York: Penguin, 2014), veteran journalist McKenzie Funk traveled the globe for six years, following the money in twenty-four countries to profile "hundreds of people who felt climate change would make them rich."

In a separate interview, Funk notes that "on Wall Street you no longer get a lot of climate denial." Largely indifferent to the causes of climate change, his respondents decided early on that investing in green technology was a losing proposition. Instead "the warmer the world, the less habitable it became, the bigger the windfall."

In 2008, Royal Dutch Shell developed two sophisticated climate-risk scenarios called Blueprints and Scramble. The first modeled a greener future while the latter predicted – due to government inaction – a future of droughts, floods, heat waves and super storms. By 2012, Shell executives confided to Funk "We've gone to Scramble. This is a Scramble kind of world. This is what we're doing." Another Shell official opined "I will be one of those persons cheering for an endless summer in Alaska."

The author's message is that in the short term, there will be definite winners and losers because ecological catastrophe is "...not necessarily a financial catastrophe for everyone." And while readers of this newspaper will temporarily avoid the most dire consequences of globing warming, upwards of one billion other human beings won't be spared.

During this interim period, the phrase 'a rising tide will lift all yachts' is more than a metaphor:

Many people consider water a necessity, a basic human right, but investment advisers and their well-heeled clients view water as blue gold, the "petroleum of the next century" whose value as an asset class will surpass all other physical commodities. Money is pouring into "hydrocommerce" including water rights and water asset hedge funds.

ARCADIS, a Dutch engineering firm offering flood protection saw its revenues jump 26 percent in 2013. For $8 billion, they will wall off Manhattan from the next Sandy.

AIG's private fire fighters will race to cover palatial estates in the Los Angeles suburbs with special flame retardant material while less well-heeled citizens watch their homes burn to the ground.

Barney Schauble of Nephia, a huge hedge fund, is certain that "more volatile weather creates more risk and more appetite to protect against that risk," hence the introduction of something called "weather derivatives."

One fund manager, bullish on reinsurance companies, confidently told Funk that flooding caused by climate change allows for higher premiums so "hurricane season is actually quite a positive thing."

Although not mentioned in this book, Senator James Inhofe (R. Okla) wants to funnel even more money toward Wall Street via "Disaster Savings Accounts," whereby wealthy individuals can obtain $5,000 tax breaks to mitigate extreme weather events. Extending political chutzpah to its outer limits, Inhofe recently authored The Greatest Hoax, a book claiming that global warming is a massive conspiracy designed to increase government regulation.

A warmer world means the expansion of dengue fever beyond the tropical zones. The solution? Britain's Oxitec Corporation foresees a patented product to counter the mosquito-born disease as a surefire money maker.

Perhaps more ominous, rising sea levels make Bangladesh "ground zero" for climate change. India's response is a 2100 mile, floodlit, electrified barrier, the "fence of shame," erected to prevent some twenty-five million Bangladeshi climate refugees from crossing the border when one-fifth of their county is under water.

I anticipate university level Environmental Finance Centers to shift from environmental protection to favorably position graduates to to take advantage of the looming ecological crisis.

Funk is curiously nonjudgmental about his interview subjects, preferring to view them as good people "according to their own belief system," who only act out of perceived self-interest. He allows that "We can't trust capitalism to fix this" but asserts there's “nothing fundamentally wrong with profiting from disaster" and frets that readers might unfairly vilify businessmen.

In one narrow sense he's correct in that the system's internal but fatally flawed logic is responsible. Any CEO who allowed climate justice considerations to enter his or her decisions would quickly be replaced by someone more attuned to the bottom line.

In an earlier opinion piece, I characterized many otherwise caring folks who truly worry about the earth's survival as "capitalism deniers" because of their unwillingness to utter the "C" word. This, despite the fact that blame for environmental degradation lies squarely with our growth-and-profit-at-any-cost economic system. The system's apologists exist within and outside government and they will never be the solution.

The rest of us must draw the obvious conclusions and act accordingly within the tenuous time frame that remains.

This work is licensed under a Creative Commons Attribution-Share Alike 3.0 License.

Gary Olson, Ph.D. Is chair of the Political Science Department at Moravian College in Bethlehem, PA. Contact: olson@moravian.edu

New analysis, hearing, report make clear: tax dodging corporations siphon revenue that could help Main Street

- Andrea Germanos, staff writer

Profits for U.S. companies are at a record high, yet companies have hoarded nearly one trillion overseas to dodge U.S. taxes, a new Moody's analysis shows.

Photo: janinsanfran/cc/flickr The findings, based on an analysis that looked at U.S. non-financial, Moody’s-rated companies, also reveal that these companies had stockpiled $1.64 trillion in cash at the end of 2013. That's about up about 12 percent from the year before.

Leading the pack of cash hoarders is Apple, which stockpiled $158.8 billion last year.

One of the companies exploiting tax loopholes to avoid paying U.S. taxes is Peoria, Illinois-based Caterpillar, which was scrutinized Tuesday at a Senate Permanent Subcommittee on Investigations hearing.

"Caterpillar is an American success story that produces iconic industrial machines. But it is also a member of the corporate profit-shifting club that has transferred billions of dollars offshore to avoid paying U.S. taxes," Subcommittee Chairman Carl Levin said in his opening statement.

Current polices incentivize such practices because companies don't have to pay taxes on profits from these overseas subsidiaries if the money isn't brought back to the United States.

That kind of loss of revenue has real impacts on Americans, Levin added, because it "increases the tax burden on working families, and it reduces our ability to make investments in education and training, research and development, trade promotion, intellectual property protection, infrastructure, national security and more – investments on which Caterpillar and other U.S. companies depend for their success."

This echoes findings from a report released last week showing that the decrease in corporate tax revenues has "demonstrably harmed state and federal budgets and the provision of services those funds pay for."

"Millions of Americans have yet to see any economic recovery," stated George Goehl, Executive Director of National People’s Action, which co-authored the report. "They're struggling to find jobs, make ends meet, and provide for their families. This report shows that the revenue needed for recovery didn't just vanish, it was siphoned off by corporations who refuse to pay their fair share."

The report shows that the downward spiral in funding of public services like schools and roads could be helped by an increase in corporate tax revenue. Some lawmakers, however, have pushed austerity on Main Street as the only option, as Sarah Anderson, Global Economy Project Director at the Institute for Policy Studies, told Common Dreams.

"It's astounding that Rep. Paul Ryan and other pro-austerity ideologues are claiming that we have no choice but to slash spending on vital programs like food stamps and Medicaid while big corporations are draining the Treasury through massive tax dodging," Anderson said.

Sen. John McCain, the ranking minority member of the subcommittee, blamed "the highest corporate tax rate of any country in the world" — 35 percent— as motivation for corporations like Caterpillar to park profits overseas.

very few companies pay anything like those rates. Total corporate federal taxes paid fell to 12.1% of U.S. profits in 2011, according to the Congressional Budget Office. The average profitable company in the Fortune 500 paid just 18.5% of its profits in federal income taxes between 2008 and 2010, according to Citizens for Tax Justice, a nonpartisan tax research organization. Dozens of large and profitable companies paid nothing in recent years.

"It is long past time to stop offshore profit shifting and start ensuring that profitable U.S. multinationals meet their U.S. tax obligations," Levin stated.

____________________

This work is licensed under a Creative Commons Attribution-Share Alike 3.0 License.

“Nobody on this planet is going to be untouched by the impacts of climate change,” was the message of the UN's Intergovernmental Panel on Climate Change (IPCC) in a voluminous new report published Monday.

The statement was made by Rajendra Pachauri, chair of the IPCC, speaking at a press conference in Yokohama, Japan on the release of Climate Change 2014: Impacts, Adaptation, and Vulnerability by Working Group II of the IPCC.

The objective of the report, the second in a series of three, is to "consider the vulnerability and exposure of human and natural systems, the observed impacts and future risks of climate change, and the potential for and limits to adaptation," according to report authors.

The effects of climate change are already among us from melting sea ice to droughts and severe storms. However, the authors note, with imminent threat to global food stocks and human security, the worst is yet to come.

"The findings make an increasingly detailed picture of how climate change – in tandem with existing fault lines such as poverty and inequality – poses a much more direct threat to life and livelihood," according to the Guardian's Suzanne Goldenberg, writing about the report. The report highlights how already visible impacts of climate change—such as killer heat waves in Europe, wildfires in Australia, and deadly floods in Pakistan—will lead increasingly to humanitarian crises around the world.

Further, Goldenberg reports, the report "struck out on relatively new ground by drawing a clear line connecting climate change to food scarcity, and conflict."

According to the report, climate change has already had an impact on global food supply with global crop yields, particularly wheat, in decline. The future, Goldenberg writes, "looks even more grim," with dramatic estimated drops in corn production as well.

Couched in the vernacular of risk and risk management, the report concludes that responding to the changing climate is a matter of "making choices about risks in a changing world."

“We live in an era of man-made climate change,” said Vicente Barros, Co-Chair of Working Group II. “In many cases, we are not prepared for the climate-related risks that we already face. Investments in better preparation can pay dividends both for the present and for the future.”

In a more direct warning to world leaders—who have been slow to make any significant changes despite the growing threat of climate change—Pachauri added, “The one message that comes out of this is the world has to adapt and the world has to mitigate.”

A three-year joint effort by more than 300 scientists, the much-anticipated release is considered the definitive account on the state of climate science. Nearly 500 experts and government officials signed off on the wording of 2,600-page report.

_____________________

This work is licensed under a Creative Commons Attribution-Share Alike 3.0 License.

What does the Supreme Court’s “McCutcheon” decision this week have to do with today’s jobs report, showing 192,000 new jobs for March?

Connect the dots. More than five years after Wall Street’s near meltdown the number of full-time workers is still less than it was in December 2007, yet the working-age population of the U.S. has increased by 13 million since then.

This explains why so many people are still getting nowhere. Unemployment among those 18 to 29 is 11.4 percent, nearly double the national rate. Most companies continue to shed workers, cut wages, and horde their cash because they don’t have enough customers to warrant expansion. Why? The vast middle class and poor don’t have enough purchasing power, as 95 percent of the economy’s gains go to the top 1 percent.

That’s why we need to (1) cut taxes on average people (say, exempting the first $15,000 of income from Social Security taxes and making up the shortfall by taking the cap off income subject to it), (2) raise the minimum wage, (3) create jobs by repairing roads, bridges, ports, and much of the rest of our crumbling infrastructure, (4) add teachers and teacher’s aides to now over-crowded classrooms, and (5) create “green” jobs and a new WPA for the long-term unemployed.

And pay for much of this by raising taxes on the top, closing tax loopholes for the rich, and ending corporate welfare.

But none of this can be done because some wealthy people and big corporations have a strangle-hold on our politics. “McCutcheon” makes that strangle-hold even tighter. Connect the dots and you see how the big-money takeover of our democracy has lead to an economy that’s barely functioning for most Americans.

If wealth and income weren’t already so concentrated in the hands of a few, the shameful “McCutcheon” decision by the five Republican appointees to the Supreme Court wouldn’t be as dangerous. But by taking “Citizen’s United” one step further and effectively eviscerating campaign finance laws, the Court has issued an invitation to oligarchy.

Almost limitless political donations coupled with America’s dramatically widening inequality create a vicious cycle in which the wealthy buy votes that lower their taxes, give them bailouts and subsidies, and deregulate their businesses – thereby making them even wealthier and capable of buying even more votes. Corruption breeds more corruption.

That the richest four hundred Americans now have more wealth than the poorest 150 million Americans put together, the wealthiest 1 percent own over 35 percent of the nation’s private assets, and 95 percent of all the economic gains since the start of the recovery in 2009 have gone to the top 1 percent — all of this is cause for worry, and not just because it means the middle class lacks the purchasing power necessary to get the economy out of first gear.

It is also worrisome because such great concentrations of wealth so readily compound themselves through politics, rigging the game in their favor and against everyone else. “McCutcheon” merely accelerates this vicious cycle.

As Thomas Piketty shows in his monumental “Capital in the Twenty-First Century,” this was the pattern in advanced economies through much of the 17th, 18th, and 19th centuries. And it is coming to be the pattern once again.

Picketty is pessimistic that much can be done to reverse it (his sweeping economic data suggest that slow growth will almost automatically concentrate great wealth in a relatively few hands). But he disregards the political upheavals and reforms that such wealth concentrations often inspire — such as America’s populist revolts of the 1890s followed by the progressive era, or the German socialist movement in the 1870s followed by Otto von Bismarck’s creation of the first welfare state. In America of the late nineteenth century, the lackeys of robber barons literally deposited sacks of money on the desks of pliant legislators, prompting the great jurist Louis Brandeis to note that the nation had a choice: “We can have a democracy or we can have great wealth in the hands of a few,” he said. “But we cannot have both.”

Soon thereafter America made the choice. Public outrage gave birth to the nation’s first campaign finance laws, along with the first progressive income tax. The trusts were broken up and regulations imposed to bar impure food and drugs. Several states enacted America’s first labor protections, including the 40-hour workweek. The question is when do we reach another tipping point, and what happens then?

Every year I ask my class on “Wealth and Poverty” to play a simple game. I have them split up into pairs, and imagine I’m giving one of them $1,000. They can keep some of the money only on condition they reach a deal with their partner on how it’s to be divided up between them. I explain they’re strangers who will never see one other again, can only make one offer and respond with one acceptance (or decline), and can only communicate by the initial recipient writing on a piece of paper how much he’ll share with the other, who must then either accept (writing “deal” on the paper) or decline (“no deal”).

You might think many initial recipients of the imaginary $1,000 would offer $1 or even less, which their partner would gladly accept. After all, even one dollar is better than ending up with nothing at all.

But that’s not what happens. Most of the $1,000 recipients are far more generous, offering their partners at least $250. And most of partners decline any offer under $250, even though “no deal” means neither of them will get to keep anything.

This game, or variations of it, have been played by social scientists thousands of times with different groups and pairings, with surprisingly similar results.

A far bigger version of the game is now being played on the national stage. But it’s for real — as a relative handful of Americans receive ever bigger slices of the total national income while most average Americans, working harder than ever, receive smaller ones. And just as in the simulations, the losers are starting to say “no deal.”

According to polls, they’ve said no deal to the pending Trans Pacific Trade Agreement, for example, and Congress is on the way to killing it.

It’s true that history and policy point to overall benefits from expanded trade because all of us gain access to cheaper goods and services. But in recent years the biggest gains from trade have gone to investors and executives while the burdens have fallen disproportionately on those in the middle and below who have lost good-paying jobs.

By the same token, most Americans are saying “no deal” to further tax cuts for the wealthy and corporations. In fact, some are now voting to raise taxes on the rich in order to pay for such things as better schools, as evidenced by the election of Bill de Blasio as mayor of New York.

Conservatives say higher taxes on the rich will slow economic growth. But even if this argument contains a grain of truth, it’s a non-starter as long as 95 percent of the gains from growth continue to go to the top 1 percent – as they have since the start of the recovery in 2009.

Why would people turn down a deal that made them better off simply because it made someone else far, far better off?

Some might call this attitude envy or spite. That’s the conclusion of Arthur Brooks, president of the American Enterprise Institute, in a recent oped column for the New York Times. But he’s dead wrong.

It’s true that people sometimes feel worse off when others do better. There’s an old Russian story about a suffering peasant whose neighbor is rich and well-connected. In time, the rich neighbor obtains a cow, something the peasant could never afford. The peasant prays to God for help. When God asks the peasant what he wants God to do, the peasant replies, “Kill the cow.”

But Americans have never been prone to “kill the cow” type envy. When our neighbor gets the equivalent of new cow (or new car), we want one, too.

Yet we are sensitive to perceived unfairness. When I ask those of my students who refuse to accept even $200 in the distribution game why they did so, they rarely mention feelings of envy or spite. They talk instead about unfairness. “Why should she get so much?” they ask. “It’s unfair.”

Remember, I gave out the $1,000 arbitrarily. The initial recipients didn’t have to work for it or be outstanding in any way.

When a game seems rigged, losers may be willing to sacrifice some gains in order to prevent winners from walking away with far more — a result that might feel fundamentally unfair.

To many Americans, the U.S. economy of recent years has become a vast casino in which too many decks are stacked and too many dice are loaded. I hear it all the time: The titans of Wall Street made unfathomable amounts gambling with our money, and when their bets went bad in 2008 we had to bail them out. Yet although millions of Americans are still underwater and many remain unemployed, not a single top Wall Street banker has been indicted. In fact, they’re making more money now than ever before.

Top hedge-fund managers pocketed more than a billion dollars each last year, and the stock market is higher than it was before the crash. But the typical American home is worth less than before, and most Americans can’t save a thing. CEOs are now earning more than 300 times the pay of the typical worker yet the most workers are earning less, and many are barely holding on.

In 2001, a Gallup poll found 76 percent of Americans satisfied with opportunities to get ahead by working hard, and only 22 percent were dissatisfied. But since then, the apparent arbitrariness and unfairness of the economy have taken a toll. Satisfaction has steadily declined and dissatisfaction increased. Only 54 percent are now satisfied, 45 percent dissatisfied.

According to Pew, the percentage of Americans who feel most people who want to get ahead can do so through hard work has dropped by 14 points since about 2000.

Another related explanation I get from students who refuse $200 or more in the distribution game: They worry that if the other guy ends up with most of the money, he’ll also end up with most of the power. That will rig the game even more. So they’re willing to sacrifice some gain in order to avoid a steadily more lopsided and ever more corrupt politics.

Here again, the evidence is all around us. Big money had already started inundating our democracy before “Citizens United vs. Federal Election Commission” opened the sluice gates, but now our democracy is drowning. Only the terminally naive would believe this money is intended to foster the public interest.

What to do? Improving our schools is critically important. Making work pay by raising the minimum wage and expanding the Earned Income Tax Credit would also be helpful.

But these are only a start. In order to ensure that future productivity gains don’t go overwhelmingly to a small sliver at the top, we’ll need a mechanism to give the middle class and the poor a share in future growth.

One possibility: A trust fund for every child at birth, composed of an index of stocks and bonds whose value is inversely related to family income, which becomes available to them when they turn eighteen. Through the magic of compounded interest, this could be a considerable sum. The funds would be financed by a small surtax on capital gains and a tax on all financial transactions.

We must also get big money out of politics — reversing “Citizens United” by constitutional amendment if necessary, financing campaigns by matching the contributions of small donors with public dollars, and requiring full disclosure of everyone and every corporation contributing to (or against) a candidate.

If America’s distributional game continues to create a few big winners and many who consider themselves losers by comparison, the losers will try to stop the game — not out of envy but out of a deep-seated sense of unfairness and a fear of unchecked power and privilege. Then we all lose.